Daimler Chrysler (Thailand) with a lesson to learn

Local culture is proven once again to be a very important factor in doing business in Thailand, and differences in culture could disrupt an operation. Different from the German car maker Bayerisch Motoren Werke, which adopts a soft approach in forming BMW (Thailand) with its Thai partner earlier this year, Daimler Chrysler AG holds a tougher stance in approaching the Thai market.

Daimler Chrysler (Thailand) was established fully-owned by its German parent, discarding its old local partner, the Viriyaphan family, which sold the car for more than half a century. Difference in cultures have made the German giant to go alone at its own risk, said industry sources. Top executives of DCT said last week that the Thai operation has been smooth. But the fact is that there has been no new Mercedes cars available in the market in the past four months, said the sources.

There used to be more than 100 Benz dealers in Thailand, and those made the Kingdom the fifth or sixth largest market. Daimler Chrysler disintegrated the old dealership, trying to set up a new distribution network. Germany’s Daimler must learn from a lesson with Yawaze family in Japan, and from Ford Motor Co who maintains its strategic ties with Sukhosol and Sarasin families in doing business here, in an effort to assimilate the Thai business culture.

Ford Operation opens 4 subsidiaries in past six months

Ford Operation (Thailand), which controls operations of Ford, Mazda and Volvo cars in Thailand, has set up 4 more subsidiaries in the Kingdom in the first half of this year, in a plan to expand operations, says chairman David Sneider. Ford has also invested into a finance company, United Capital Co., and now has a total of 11 subsidiaries/operations in the Kingdom.

Ford Operation recently set up Mazda Sales (Thailand) to take care of sales and service of Mazda cars, while another subsidiary, Mazda Engineering Thailand will be responsible for engineering works, Mr. Sneider said. Ford Sales also oversees the operation of Volvo Thailand and Thai-Swedish Motor Co., which assembles Volvo cars here.

Ford Operation has been set up as ‘back room’ to support all the subsidiaries, while sales and marketing operations of each car, Ford, Mazda and Volvo, will be separated. Ford Operation is determined to expand B-Quik ‘auto clinic’ chain, a total of 100 branches is projected in a three-year period, from 13 branches at present.

Phuket Floatplane prepares for takeoff late this year

Phuket Floatplane Co. said it hopes to bring two floatplanes into service in the southern tourist resort later this year when the project is approved by the department of aviation. The seaplane, which also has the capability of landing on a land runway, will take tourists up to see the beauty of Phuket and its satellite islands, said Jeff Edwards, the managing director.

The floatplane service has been among several investment projects in tourism in the booming Phuket area in the first 6 months of 1999. Investment in tourism has constituted 85% of the overall investments in the same period, said Veera Tantiwattanawallop, chief of local trade registering office. A total of 228 investors with Baht 1,186 billion in investment capital have applied for licenses between January and June, he said.

The floatplane will offer 30-40 minutes flights for a glimpse of Phuket’s beauty from the sky. The company will have to spend Baht 25 million in starting up the service with 2 small seaplanes. The investment projects, and the cost, in the tourist resort island have sharply increased from 180, and Baht 325.3 million, in the same period in 1998.

GM (Thailand) mulls Asian car project

General Motor (Thailand) is close to finishing construction of an assembly line to produce Opel cars in Thailand, while at the same time planning a new family car for the Asian market. The plant’s body production units, made by Japan’s Yoshida heavy industry, have been tested intensively, resulting in an impressive outlook, said GM sources. A complete assembly line at GM’s Rayong plant is expected in October, they said.

The Opel Zafira will be constructed out of 40% locally-made parts, while the rest of the parts will come from Europe, said the sources. Only 30% of the Thai-made car will be sold in the domestic market while the other 70% will be exported. Meanwhile, the company is studying a plan to produce a sedan model for the Asian market, they said.

The Asian car project was proposed by Holden, which is responsible for GM car production in Thailand.

The GM assembly plant, designed in 1997, was to bring out 100,000-units/year of the Zafira utility car. The Thai crisis has, however, changed the company’s plan, and the output has been reduced to 70,000 units a year with the capability to expand.

Tax cuts & new customs duties among measures in new recovery package

The ministry of finance proposed the long-expected recovery package for cabinet approval on July 20. The new package, the third in a series implemented since August last year, aims to spur the economic growth. The proposal involved cuts in income taxes, lower import/export duties and a new fund to drive property sales.

According to ministry sources, measures to inject liquidity into small and medium-sized industries, and to help boost income from the tourism industry, were also included in the new package. The plastic, chemical and steel production industries will highly benefit from the new package, said the sources who declined to be name.

A total of Baht 50 billion in loans will be allocated to help stimulate sales in the property sector with the Government Housing Bank to lead in providing loans to lower group of lenders.

Duties on imported items for tourists, which include sunglasses and fountain pens among others, will be reduced to an historically low rate.

Refinery to close temporarily for maintenance

The largest oil refinery in Thailand, Thai Oil, will close from July 31 for a 45-day periodical check. The closure is expected to help reduce the oil surplus in the market.

Meanwhile, Thai Oil said last week it will relocate its head office from Bangkok to Sriracha this August 1. The relocation will help save about Baht 20 million a month.

The closure of refining units will enable Thai Oil to reduce a surplus of 100,000 barrels of oil produced each day by the refinery, said the company sources. Thai Oil has already reduced the diesel oil output in an effort to bring down the surplus, and to stimulate demands in the market, which will help boost marketing margins, they said.

Sources said Thai Oil would do anything to show efforts in cutting costs in order to please investors.

The industry has seen a small increase in refining margins recently, but a new refining plant in Vietnam has brought woes to the Asian market.

Modern trade makes color labs leave Kodak

Rows have ended with Kodak (Thailand) losing nearly 200 minilabs in its chain. Industry experts fear that the loss will reduce Kodak’s brand loyalty in the film market. Rebelling minilabs, led by former Kodak lab clubs in Thonburi and Nonthaburi, said Kodak (Thailand) had focused more on sales through convenience stores and have charged them higher prices.

Kodak (Thailand) is known to have spent about Baht 30 million for exclusivity inside 7-Eleven and AM/PM chains, and is selling more expensive film to its minilabs. Practices by Kodak (Thailand) have been against the economy which is on a downward turn, said club leaders. Most color labs under Kodak have been forced to turn to lower-priced smuggled film, mainly from Malaysia, to have more margin, they said.

Kodak (Thailand) sells a pack of 2 rolls of film for only Baht 180 in convenience stores, while forcing minilabs to sell the film at Baht 120 a roll.

Sales promotions through modern trade facilities have also hurt minilabs. Negotiations with Kodak (Thailand) have failed time and again before they decided to leave the chain, said the leaders.

Seafood from 8 producers barred from European market

Seafood products by at least 8 companies in Thailand have been rejected from Denmark, Spain, Greece, France and Italy after high levels of contamination were found. The European Union is expected to take tougher actions against imported products found tainted with toxins or hazardous chemical agents in amounts that exceed ‘safe levels’.

High levels of cadmium have been found in Thai-produced canned and frozen products, mainly prawn and squid, said sources in the Ministry of Commerce. Products by the 8 producers have been barred from entering the respective European nations, said the sources.

Experts have suspected that the Gulf of Thailand is highly polluted by onshore industrial waste tainted with chemical hazards. Contamination does not happen during the make of the foods but from within the fish itself.

Exports to EU, which are already in trouble after the GSP system was abolished, may be entering yet another round of troubles. Products by leading food processing companies - Seahorse, Kingfisher to name a couple - are among those banned. Frozen products came under the EU Automatic Detention Directives issued last April.

Big leap for Black Canyon coffee

One of the oldest and largest coffee shop chains in Thailand, Black Canyon, has been selected by the operators of the Queen Sirikit National Convention Center to cater its high quality coffee to conferences and other events there. Black Canyon (Thailand), operator and owner of the chain, is to open its largest ever branch covering 300 square meters inside the NCC this September.

Black Canyon has opened a total of 36 branches since it started more than 10 years ago. The NCC deal is under a 5-year agreement between the company and NCC Management Co., the operator, said Pravit Chitnarapong, chairman of Black Canyon (Thailand). Its presence in the convention center will help boost the chain’s image as there have been over 1 million visitors to NCC each year, Pravit said.

The chain will also open up 2 more branches this year; at Major Cineplex Theater Pin Klao and Siam Center. More Thai cuisine will be added to the NCC branch to woo foreign visitors. Black Canyon has won the right to operate the coffee chain at 22 BTS train terminals. Sales are expected to increase by 10% to 15% this year, to about Baht 250 million.

Donut shop takes on new look

Dunkin Donut Co., Royal APB Co., owner and operator of the Dunkin Donuts chain in Thailand, is to add more choices to its coffee menu while making a change to the look of Dunkin Donut shops nationwide. The move follows the model set by Dunkin’s US parent. Dunkin Donuts has won the right to operate its chain at 10 of 22 terminals of the Bangkok Transit System trains, which are to start service in December this year.

Espresso and cappuccino cups will be available in almost all Dunkin Donut shops and kiosks this year, while the bread and milk menu is under consideration, said Varin Naruela, managing director of DDC and RABP, which also runs O Bon Pain bakery chains. The facelift will follow the ‘2000 Concept’ scheme by the American chain to have a more modern look, Varin said.

Currently, coffee sales constitute only 10% of sales in the donut shops, but it is believed that the raising of the number of coffee flavors of freshly brewed cups will increase sales to 25%.

The new changes in looks have already been made to Dunkin Donut shops at the Mall 3, Hua Lam Pong central railway terminal and Lotus Supercenter on Ratchada Pisek Road. Seven to eight more kiosks will also be added to the more than 150 existing outlets this year.

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Updated by Chinnaporn Sangwanlek.