November 4, 2001	Sunday	Shaba’an 17, 1422

KARACHI, Nov 3: Al-Ghazi Tractors Limited (AGTL) has sought government’s permission for assembly of tractors under a new brand name: ‘Kissan’, which auto industry analysts suspect might have been triggered by the company’s need to draw up contingency plans in the face of series of disputes with its second largest foreign equity holder.

Sources in the tractor industry told Dawn that Al-Ghazi, makers of Fiat tractors, had sought approval from Case New Holland Tractors—a 43 per cent shareholder in the company — for access of their locally produced Fiat Tractors in the global market. The move by Al-Ghazi to launch the Kissan tractor, was spurred after Case New Holland turned down Al-Ghazi’s request. The 10-year Industrial Collaboration Agreement with New Holland had been extended for a year until December 2002, though according to the sources, such agreements are generally renewed for ten years. “This could yet be another reason for the local sponsors of Al-Ghazi to launch their own brand of tractors,” the sources said.

Market sources say that another contentious issue that has soured relationship between the local management of Al-Ghazi and the company’s second largest shareholder is the procurement of completely knocked down (CKD) kits at higher rates from the New Holland.

Due to a long stalemate on the issue, which could not be resolved even after several meetings between the two, Al-Ghazi’s local management had begun to make alternative arrangements, by virtue of which the company, besides managing 85 per cent of the CKD kits from local vendors, has started importing the balance 15 per cent from Turkey.

“Yes, we already possess a declaration from the ministry concerned for assembly of a new tractor Kissan in case our foreign partners turn their backs on us,” confirmed a senior official in AGTL to Dawn on Saturday.

The sources say that Al-Ghazi has to pay Rs10,000 per tractor as royalty to New Holland under the technical collaboration and franchise agreement for using the name ‘Fiat’. The rule still applies, though all over the world, Fiat has now changed to New Holland, after the latter took control of the global corporate giant.

Rumours are rife in the auto market including the vendor industry over reports of major shake-up in Al-Ghazi Tractors Company Limited, in the event of non-settlement of these issues. These reports come on the back of recent change in ownership of its major Dubai-based shareholder, Al-Futaim. This Dubai-based majority stakeholder with 50 per cent interest in Al-Ghazi is understood to be embattled in the problems of its own.

“Change in ownership of Al-Futaim may trigger re-organization of management staff and policy changes on their various investment projects worldwide,” sources say.

On the domestic front, the tractor industry is currently facing severe problems due to inadequate loaning facility from the Agriculture Development Bank of Pakistan (ADBP).

An average 550 tractors are being rolled out of the assembly lines per month since July this year, reflecting a steep decline from 1,200 units that went out to the market during the same period of last year, an official in Al-Ghazi said adding that the company had produced only 383 units in September and 350 units in October.

He said the company has curtailed production in view of slow down in the demand. The official would not agree that the production of Al-Ghazi tractors had been impacted due to the on- going disputes with New Holland and the changes in Al-Futaim management in Dubai. But market sources affirm that the production of the company’s arch rival, Millat Tractors, remains at levels of last year.

Overall production of tractors at Al Ghazi and Millat, combined, had dropped to 31,635 units in 2000-2001 from 34,559 units the year ago, due to poor loaning to farmers by the ADBP as well as wrestling of a bit of market share by a couple of new entrants and the second hand tractors.

The production of tractors has suffered a further fall in the recent months with the two top producers—Al-Ghazi and Millat — rolling out just about 4,965 tractors in July-September 2001- 2002. Market believes the major downturn in production to have been caused by Al-Ghazi, but everyone holds gloomy forecasts of total output to range between 16,000-20,000 units by the end of the current fiscal. That would be about one-half of the production the year ago.