Over the past few days, Iran’s beleaguered auto industry has gone through some serious ups and downs: the SAIPA boss was removed and two powerful state bodies clashed over who should have authority over the lucrative car market.
On Monday afternoon, Mohsen Jahrodi, CEO of Iran’s second-largest car company SAIPA was found unfit for the job and was replaced by Mohammad Reza Soroush, a former director of the Bahman Industrial Group.
A day later, quoting unnamed informed sources the Persian-language newspaper Donya-e-Eqtesad reported that the so-called Competition Council has filed a complaint with the Court of Administrative Justice against the Ministry of Industries claiming that it is interfering in its work.
The council is a state body that as per law has long been in charge of supervising prices of a category of domestic products, including cars.
In recent days officials from the ministry said henceforth the Market Regulatory Authority, an ad hoc committee created to check the galloping inflation and price gouging, will be in charge of setting car prices in collaboration with the Consumer and Producer Protection Organization (CPPO).
Sources tell Donya-e-Eqtesad (a sister publication of the Financial Tribune) that Industries Minister Mohammad Shariatmadari has sent a letter to the Competition Council chief Reza Shiva saying that as per a mandate issued by the Economic Coordination Council of the Heads of the Three Branches of Government, currently, the Market Regulatory Authority is in charge of setting auto prices in collaboration with the CPPO.
The council argues that there has been no change in the law and that it still has authority over the auto market.
Independent observers are of the opinion that the Market Regulatory Authority and CPPO are more in tune with Shariatmadari’s approach to the auto industry and that is why the minister wants to take authority away from the Competition Council.
The CAJ, Competition Council and the ministry are yet to officially comment on the latest controversy over who is the boss!
> SAIPA Reshuffle
In a ceremony attended by the Head of Industrial Development and Renovation Organization Mansour Moazemi and deputy minister of industries Mohesn Salehinia, Soroush was named as the new man in charge of SAIPA.
Neither the outgoing manager nor the high-profile participants or the new boss provided any explanation about the sudden change. Jahrodi, the former CEO, was appointed in November of last year.
The decision to remove the director of the major automotive company comes at a time when the auto industry is struggling with US sanctions and a deepening financial crisis. In light of the prevailing conditions, many market observers and experts criticized the move as untimely.
Similar to the fracas over which state body should oversee the process of setting car prices, independent observers say views of Soroush are closer to Shariatmadari and that is why Jahrodi was told to find another job.
Soroush addressed his inauguration and made reference to the mismanagement of funds in many companies affiliated to SAIPA and said that he plans to reduce costs and increase productivity.
Having said that, it is obvious that the new manager needs a roadmap to be able to deliver. He has yet to provide details on his plan of action to steer the bloated bureaucracy in SAIPA away from recurring crisis and lift the loss-making company from the sea of red ink.
> Saddled With Debt
Major carmakers Iran Khodro and SAIPA have a long list of debts with parts makers, banks and financiers now in the neighborhood of 200 trillion rials ($1.37 billion).
Secretary of Auto Parts Makers Association Arash Mohebinejad says that over the past few months, “Major carmakers’ debts have surpassed the previous amount of 150 trillion rials ($1.03 billion) and has reached 200 trillion rials ($1.37 billion),” a 33% jump.
Criticizing carmakers for mismanagement, and without playing with words Mohebinejad says the auto industry is in a state of chaos.
He says over the past months and due to the economic challenges, several parts makers have been forced to shut their factories and lay off thousands of workers.
During the SAIPA ceremony and in response to the outspoken critic, instead of addressing the issues, IDRO’s Moazemi reprimanded parts manufacturers for “repeatedly criticizing carmakers for failing to repay their debts.”
He said, “If nothing [unexpected] happens, car prices will be updated next week to help curb the loss of carmakers… We are doing everything we can to get the (dysfunctional) industry back on track.”
Moazemi claims that auto prices will be increased to help carmakers survive. In other words, this means that authorities are determined to keep the sinking auto industry afloat by raiding people’s pockets. For long they can do that is an open question.
The semi-state owned IKCO and SAIPA jointly produce 90% of all cars sold in Iran and have an ironclad grip over the market.
Monopoly of the car market by SAIPA and IKCO over the past four decades has culminated in, among other things, the production of low-quality vehicles which spew poison into the air, flouting safety rules and profiteering that have made cars a luxury item far from the reach of ordinary people.
With such indefensible and deplorable performance, why those in charge insist on steadfastly supporting the two companies is simply beyond imagination, to say the least.
