KARACHI, Dec 29: An unending conflict between the majority shareholders — financial institutions and the original sponsors — of the leading multinational General Tyres has become a hurdle in apppointment of a new chief executive, that now threatens the very existence and survival of one of the oldest and good corporate names in the country that once had an annual turnover of Rs2,500 million.
Dr A.S. Mufti, one of the prestigious names in Pakistan’s corporate world has resigned more than four months ago as the Chief Executive of General Tyres, following a conflict between the original sponsors Bibojee and the financial institutions Pak-Kuwait and the National Investment Turst and the Continental AG, the equity holder as well as supplier of trade mark.
What is preventing professional managers from seeking the coveted position of chief executive is the tussle between financial institutions and Continental AG on one side and Bibojees on the other side. Dr Mufti has no choice but to hold on to his position till the time the Board of Directors find a suitable successor.
Corporate circles say that a few candidates were interviewed by the Board. But none could obtain a consensus approval from a Board that has seven directors representing Pak-Kuwait, NIT and the Intercontinental AG and five of the Bibojee’s. Bibojee want its nominee to be the CEO but is unable to obtain consensus from the Board.
On request of Bibojee, the Security and Exchange Commission of Pakistan (SECP) appointed a well known chartered accountant as its inspector to investigate the affairs of the General Tyres in all aspects.
The SECP Inspector is understood to have completed his investigation and given his report to the Commission. The Commission is now expected to hear the comments of complainant and the other partners on this report before taking any decision.
In the meanwhile there are reports of negotiations going on through their respective lawyers between Bibojee and the financial institutions.
A senior executive of one of the two financial institutions confirmed of the parleys underway between the shareholders of the company but he said that financiers want GTR to continue to have technical collaboration with the Continental AG.
The Continental AG have 10 per cent equity in General Tyre Pakistan and its American subsidiary Continental Tire Inc has a trade mark agreement. The Continental AG decided to invest $85 million which the market watchers say would have made General Tyre, Pakistan, largest tyre company in Asia outside Japan. It would have generated export potential of 100 million dollars a year.
A dispute with Bibojee group on share acquisition aggrieved the Continental AG who filed an application in Trade Mark Registrar’s office to delete ‘General’ from the company’s name. The Registrar has given four extensions and two more extensions are to be given. After these extensions, sometimes late Februrary or March, the Registrar will have to hear the case and take some decision.
Market analysts see this in house dispute of shareholders in the GTR growing into a major international controversy fraught with consequences that are not desireable for Pakistan’s foreign investment environment. “This controversy is expected to reach the office of EU in Brussels, WTO in Geneva and World Bank in Washington because major German financial institutions are the shareholders of the Continental AG.
Bibojee, founded by Pakistan’s former Chief of Staff Lt General Habibullah Khatak is the original sponsor of the General Tyres with single largest shareholding of 34 per cent. Pak-Kuwait has 27 per cent shareholding and NIT has 12 per cent while Continental AG has 10 per cent.