Al-Ahram Weekly | Economy | FEI backs manufacturing magnate

		7 - 13 November 2002 Issue No. 611 Economy	Current issue Previous issue Site map
Published in Cairo by AL-AHRAM established in 1875		Recommend this page

FEI backs manufacturing magnate
Concerns regarding job losses in the car industry have prompted the bail out of a businessman in trouble with the banks. Mona El-Fiqi reports

In the first move of its kind since the government started a systematic clamp-down on loan defaulters, the Federation of Egyptian Industries (FEI) last week decided to intervene with the banks on behalf of car manufacturer Hossam Abul-Fotouh and help keep his businesses in operation.
Fotouh is currently locked in a legal battle with the banks over an alleged LE1.5 billion in unpaid debts. He is also questioning a government decision to freeze his assets. Abul-Fotouh, who manufactures BMWs in Egypt under licence from the German corporation, asked the FEI for help to keep his factory operating. He said he was worried that his legal problems would prompt BMW to revoke his licence thus threatening the jobs of 15,000 workers employed in his various companies.
The FEI's Chamber of Engineering Industries formed two committees to negotiate on Abul-Fotouh's behalf. The first committee will attempt to resolve the problem of the bank debts, while the second will negotiate with BMW to renew his licence.
Following a massive overhaul of the banking sector, during which time leadership of many banks was changed, Abul-Fotouh was one of many businessmen whose assets were placed under government control. He was one of five loan defaulters referred to the prosecutor-general, who then ordered sequestration of their assets. Abul-Fotouh and his family are not permitted to leave Egypt while official investigations are being carried out, and even though other businesses are rumoured to be negotiating with BMW for the right to manufacture cars in their name, Abul-Fotouh is unable to travel to Germany to secure his licence.
Salah El-Hadari, secretary-general of the Auto Manufacturers Association, said that committee members will be travelling to Germany by the end of this week to meet representatives of BMW.
The committee will explain Abul- Fotouh's financial situation to the German officials and try to convince them to renew his manufacturing licence.
FEI sources said assistance will also be provided to other loan defaulters who are serious about settling their debts. By providing support for Abul-Fotouh, the FEI is also trying to prevent Abul-Fotouh's situation having a negative impact on suppliers to the car manufacturing industry.
According to El-Hadari, 37 supplying industries will be affected if Abul-Fotouh's factories are closed or sold. "It will not be easy for the thousands of workers in these companies to find other jobs, especially in the current economic situation," said El- Hadari .
Ali Tawfiq, chairman of the Egyptian Auto Supply Industries Association, an FEI affiliate, praised FEI's attempts to help defaulters, especially those who employ large numbers of workers. Tawfiq said his own company, which supplies auto components to an Abul-Fotouh company manufacturing Daewoo vehicles under licence, has been indirectly affected by Abul-Fotouh's problems.
"We had no business with them last month," he said.
Car dealers say the current market instability is making people shy away from buying locally manufactured Daewoo and BMW vehicles. "They fear that these factories may have to close, and that there will be no service outlets," said one dealer.
But Ali Tawfiq hopes the situation will get better before it gets any worse.
"It is in no one's interest to close Abul- Fotouh's factories, because this will incur losses of up to LE100 million for the 37 suppliers who depend on them," he said.
Tawfiq added that the 35,000 workers in the supplying industries will be the worst affected.

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