Zemen Bank looking to foreclose Holland Car


Zemen Bank SC is looking to file for foreclose against one of the pioneer car assembly company Holland Car due to the company’s failure to settle its loan.
Sources at Zemen Bank told Capital that Holland Car, the first automobile assembly plant since the advent of EPRDF government in the country, has lagged far behind in paying its loans. Despite repeated warning the bank claims that Holland Car continued to miss payment on its loans.
According to sources at the auto assembly, the twenty percent devaluation of the birr against major hard currencies in September 2010 has greatly harmed the automobile assembly company. The contract that the assembly plant had with its first customers in 2009 and major part of 2010 had not foreseen the devaluation and other price escalations, which contributed to Holland Car to operate at a loss. “We lost 80,000 birr on each Abay and Tekeze automobile brands we delivered, and we lost an additional 100,000 birr for the delivery of Awash brand. These and other additional and un-expected price hikes are some of the reasons why the car assembly slowed down its activity,” sources said.
The transportation cost increment, spare part price hikes from the original supplier, delay to access foreign currency for letters of credit (LC) from local banks, and customs charge increases were some of the major factors that have led Holland Car to default on its loan payments, sources added.
According to sources, vehicle supply contracts signed after June 2010 and in 2011 made provisions for inflation and other additional prices factors.
Officials at Zemen say that the bank has not yet decided to begin foreclosure process “but if the company continues to default, then foreclosure ought to happen.”
A year ago the local auto assembler agreed with its over 600 customers, who entered contract with the assembly from 2009 to 2011, to jointly undertake the letter of credit (LC) process to import parts in order to assemble the automobiles quickly.
After continuing delays in delivering the cars, customers established a committee and agreed to pay in full so they could get their cars delivered in a few months. Previously, when one bought a car he or she only had to make a 30 percent down payment in return for a longer period of wait to take delivery of their vehicle.
According to sources, the auto assembly plant has delivered 480 cars for its customers from the total 600. “We do not know if the rest of the cars are in the process of being delivered to the customers or not,” sources said.
Based on last year’s agreement, customers have advanced seventy percent of the total cost and made certain the line of credit process went ahead with the bank (Zemen Bank) and Holland Car to ensure the shipment of the parts for assembly.
Based on the two parties’ deal, the automotive company had agreed to transfer the cars within six months.
Capital’s efforts to reach relevant officials at the Holland Car assembly and Tadesse Tessema (Eng.), founder and owner of the company were not fruitful. According to sources, the owner is out of the country. Holland Car was established in 2005 through a joint venture (JV) by Tadesse Tessema (Eng) and Trento Engineering, a Dutch company, to supply assembled vehicles for local and export markets, with an initial capital of 11 million Birr equally contributed by both shareholders. Holland Car assembles its vehicles at its factory located in Mojo Town, Oromia Regional State, 70 kms south of Addis Ababa.