Turkey looks to sell relic of British automotive industry

By bne IntelliNews February 10, 2014

David O'Byrne in Istanbul -

The announcement of a tender to sell Turkish vehicle manufacturer BMC looks set to end a chapter in not just the Turkish automotive sector but also that of the British automotive sector.

On February 4, the Turkish government-administered Saving Deposit Insurance Fund, or TMSF, said it will hold a tender on April 10 for the sale of commercial and military vehicle manufacturer BMC for around TRY985 million (€327m). BMC was declared bankrupt and confiscated by TMSF in May after its parent company Cukurova Holding failed to meet certain financial obligations.

Founded in 1964 as a joint venture between local partners and the British Motor Corporation (later British Leyland) from whose initials it took its name, BMC is the third oldest of Turkey's 15 vehicle manufacturers. The company continued to produce Leyland-designed vehicles under licence following Leyland's pull out in 1979 and in 1989 was bought by Turkey's Cukurova group, from which it was last year seized in lieu of unpaid debts.

Under Cukurova, the company's fortunes initially appeared assured. By the late 1990s, BMC was producing a large range of mainly self-designed specialist commercial vehicles, including a range of small trucks that it was exporting to the UK - albeit not under the BMC marque, for which it only holds the rights to use in Turkey.

Turkey's low manufacturing costs and high skill base means its car sector has long been geared to the European market, still the destination of around 75% of Turkey's vehicle exports.

But along with the rest of the Turkish automotive sector, BMC was hit hard by the global economic crisis of 2008 and the subsequent Eurozone crisis.

By 2008 Turkey's total vehicle production capacity had grown to 1.6m vehicles a year with actual production hitting 1.17m of which 920,000 were exported. But the effects of the crisis and subsequent Eurozone problems saw production slump to just 884,000 in 2009. Although by last year production had bounced back to 96% of pre-crisis levels at 1.125m, exports remained 10% down at only 828,000 due to continuing lower demand in Europe.

It's into this market that the TMSF hopes to sell BMC, with the fund having published a guide price of TRY985m - a price analysts concur is high despite the brand still having a long history and a high recognition factor in Turkey. "Turkey remains a very tight market for commercial vehicle manufacturers and 2014 looks like it will be a difficult year," reckons Onur Marsan, automotive analyst at Istanbul brokerage Garanti Yatirim.

Worse for BMC is that its own financial position is far from clear. Having won an order in 2009 to supply the Turkish military with 468 of its own designed "Kirpi" mineproof troop carriers, the company subsequently failed to deliver 175 of the ordered vehicles after experiencing difficulty paying staff salaries on time, a failure which led to its being seized last year.

And with BMC currently not filing production figures to Turkey's Automotive Manufacturers Association (OSD) it is unclear whether it is actually still manufacturing. The most recent figures available show that in 2012 BMC sold less than 1,500 vehicles, suggesting a sale might be difficult to finalise at any price.

It also appears than an auction was not the fund's first choice of means to offload the company, having already disposed of Cukurova's media assets without opening tenders.

Reports emerged last year claiming that Turkish construction-to-energy group Calik was close to finalising the purchase of BMC with plans to develop a "wholly Turkish" model of passenger car. Calik was quick to deny the reports, which appeared to have been based on the group's perceived closeness to Turkish Prime Minister Tayyip Erdogan and the PM's frequent calls for Turkish companies to develop a "Turkish car" - a plan analysts suggest would be commercially untenable.

If, as many expect, BMC cannot be sold by open tender, it seems certain to be wound up and its Izmir factory and other assets sold off individually.

As well as potentially spelling the end of the historic BMC marque, it would also spell the end of the association between Izmir with the British automotive sector, which stretches back far longer than the establishment of BMC's Turkish subsidiary.

Ironically, Izmir was the birthplace of the British parent company's most celebrated vehicle designer, Sir Alec Issigonis. Born in what was then Smyrna in 1906, Issigonis migrated with his family to the UK aged 16 and later became BMC's top designer responsible for designing the company's two most iconic vehicles, the Morris Minor and the Mini.

Turkey looks to sell relic of British automotive industry

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