IDRO Chief Renegotiating Renault Deal in Paris

Head of Iran Industrial Development and Renovation Organization Mansour Moazemi was in Paris over the weekend to renegotiate a deal with Renault.

French carmaker Renault signed a €660-million trilateral production deal with IDRO and a local private company Negin Khodro in August. According to the deal, a subsidiary of SAIPA, Bonro — a factory in Saveh, 100km southwest of Tehran — was to be handed over to Renault. Financial Tribune’s sister publication, the Persian-language newspaper Donya-e-Eqtesad, has reported that SAIPA is refusing to comply.

Sources close to IDRO have confirmed the report. Speaking to Financial Tribune on the condition that they not are identified, they said the outcome of the Paris meeting and what issues were discussed is not yet clear.

Ownership of the Bonro plant has always been a point of contention between IDRO and SAIPA and the latter has claimed that IDRO has no legal claim to the production site. This is while IDRO is the main shareholder in SAIPA and the automotive company’s CEO as a rule is appointed by the IDRO director.

According to unconfirmed reports, Moazemi has proposed two factories as possible replacements for Bonro. One of the factories is located near the northwestern city of Tabriz, but due to it being faraway (630km) from Tehran, it is likely to be rejected by Renault.

IDRO’s other option is more likely to be accepted — Farda Automobile Manufacturing Co. (FAM Co.) located in Garmsar, Semnan Province  -- a two-hour ride south of Tehran.

FAM was officially inaugurated in April by President Hassan Rouhani. The factory has been built with private investment of 1.1 trillion rials ($28 million).

During the inauguration ceremony Rouhani had said, “The plant has the capacity to produce 100,000 cars annually.”

The factory employs 150 workers and the number will increase considerably when production reaches full capacity. FAM Co. has a contract with Iran Khodro and produces the locally designed Samand.

However, it is not certain whether Renault will accept FAM Co. since the factory’s production capacity is 50,000 units lower than the French automotive company’s announced goal. According to Renault officials, the company wants to produce 150,000 cars in Iran next year and gradually double the number.

 Dispute Over Bonro

The fracas between SAIPA and IDRO goes back to October when SAIPA officials said IDRO did not own the Bonro site and apparently cannot transfer its ownership to the French carmaker.

At the time, Moazemi said SAIPA was negotiating a deal with some foreign company to offer Bonro, which was opposed by the Industries Ministry. “After the latest negotiations SAIPA agreed to handover Bonro to IDRO,” he was quoted as saying.

According to Moazemi, SAIPA owes 8 trillion rials ($2.3 billion) to IDRO and it seems the organization has used the huge unmet financial commitment as leverage to force SAIPA into an agreement it does not want.

Earlier, local media reported that SAIPA was aiming to sell the Bonro plant to Chinese automaker Changan and had offered a 50% share in Pars Khodro (another subsidiary of the company) to Renault.