Argentum to upgrade Noida unit

New Delhi: To infuse Rs 500 cr, in talks with Daimler-Hero JV for contract manufacturing

Argentum Motors, the owners of the erstwhile Daewoo Motors’s India unit in Greater Noida, will infuse Rs 500 crore to modernise the facility over the next 18 months as it gears up to host Daimler Trucks for the latter’s proposed light commercial vehicle roll out.

The promoters of Argentum Motors, ex-Hyundai chief BVR Subbu and SpiceJet Director Ajay Singh, plan to start contract manufacturing operations at the facility for which the company is in talks with various international players, including Daimler, Volkswagen, Renault, Citroen and Peugeot, according to sources close to the company.

Argentum is likely to favour Daimler which intends to roll out its LCVs from the manufacturing unit. Daimler has tied up with the Hero Group to manufacture LCVs for the domestic and international markets.

“Argentum prefers the Daimler-Hero JV to start contract manufacturing operations in the facility. Though the company is talking to several international players, in all likelihood, Daimler would be given use of the plant,” sources added.

Speaking to PTI, Ajay Singh said the company intends to start manufacturing within six months and is expected to utilise 100 per cent capacity within the 12 months.

“This facility is one of the most modern units in the country. However, we would invest Rs 500 crore over the next 18 months to modernise paint shop, assembly shop and body shop,” Singh said.

He, however, did not comment on the speculation of a deal between Argentum and Daimler-Hero.

“Yes, we have spoken to several automobile manufacturers and Daimler is one of them. I have nothing more to say beyond that. We make a compelling case for any company to outsource manufacturing as it will have an immediate cost advantage of 8-18 per cent,” Singh said.

On the investment front, Singh said the company is yet to decide on funding options.

“We are looking at all possible options to fund the proposed investment. It will be primarily funded by a mix of debt and internal accruals.”

The company expects to break-even within the first 12 months of operations by June 2009. The plant has a capacity of two lakh passenger cars and four lakh transmissions and engines per annum. It was set up 10 years ago at a cost of Rs 3,000 crore.

Singh had successfully bid for the plant through Crosslink, a finance outfit. Argentum Motors is a special purpose vehicle, in which BVR Subbu and Anand Deora are partners along with IL&FS, Hong Kong-based market fund Sattva and global hedge fund DE Shaw. Crosslink paid Rs 800 crore for the facility.

South Korea’s Daewoo Motors, which went bust in 1999, was acquired by General Motors, the world’s largest automobile maker.

GM had agreed to acquire four of the 16 Daewoo plants globally but India was kept out of the deal. The Indian plant stopped production in 2002, followed by a lock-out in 2003.

Daewoo India’s plant was put on sale after the company failed to repay a debt of around Rs 1,000 crore to financial institutions and the customs department.

In 2005, the lenders sold all the assets to Arcil and subsequently Argentum Motors bid for the unit.

The Debt Recovery Tribunal (DRT) accepted Argentum’s bid this year and the company took possesion of the plant in October this year.