Ashok Leyland to acquire AVIA Truck business

Company News

NEW DELHI,July 21

Ashok Leyland, the Indian flagship of the Hinduja Group, has signed a framework agreement to acquire the Truck Business Unit of AVIA a.s. in Prague. Headquartered at Prague, AVIA makes the D Line trucks in the 6T to 9T GVW range and has marketing footprints in Europe. The acquisition covers the facility at the heart of the Czech capital, with an annual production capacity of 20,000 vehicles, which is supported by a state-of-the-art cataphoretic paint shop and R&D facilities. The sale is subject to the completion of certain conditions as well as corporate and statutory approvals by both Ashok Leyland and AVIA. It is expected that the acquisition will take place by the end of August 2006.

“AVIA is part of our inorganic growth plan and is a significant step in securing a beachhead in the European Union and the Eastern European markets. The acquisition will also give us a modern, international vehicle for our light and medium commercial vehicle range of trucks for India and other export markets”, said Mr. R. Seshasayee, Managing Director of Ashok Leyland. The strategic location of AVIA also opens up possibilities of using its facilities as an assembly and marketing base for some of Ashok Leyland's future products on the anvil.

Since their launch in 2001, the D series trucks consisting of 6T, 7.5T and 9T GVW models are marketed in the Czech Republic, Hungary, UK, Ireland, Italy, Slovakia and Spain. With a width of 2.15 mtrs, the D series trucks have a modern, compact cabin with both day and sleeper versions. They are powered by 150 hp / 170 hp Cummins ISB engines and feature ZF 5.42 and ZF 6S 850 gearboxes.

In early June, AVIA unveiled D120, a 12 tonne model as well as D110 and D100, 11 tonne and 10 tonne models respectively. The new models also feature the all-new 4.5 L Cummins ISB Euro IV engine with Selective Catalytic Reduction (SCR) technology. The new Cummins engines offer power outputs of 140 hp, 160 hp and 185 hp.

Spelling out Ashok Leyland's plans for AVIA, Mr R. Seshasayee mentioned that although the present volume of sales from AVIA was limited, there was a good potential to scale up, through new markets such as the Middle East, South East Asia, Russia and Ukraine and by consolidating and strengthening existing dealership arrangements in Europe. He expressed confidence that there was potential to save material costs through component / aggregate sourcing out of low cost countries. The planned scale up of AVIA operations will absorb the current strength of around 275 employees. New products from the Ashok Leyland range, in line with market expansion plans to be drawn up, will be inducted into the AVIA portfolio, in due course.

Started as an aircraft and engine manufacturer in 1919, AVIA diversified later into trucks and signed licence agreement with Renault in 1967. In 1995, 50.2% share in AVIA was acquired by Daewoo Motor Corporation Ltd. which invested to upgrade AVIA's production capabilities and product technology to international standards, leading to the launch of the D Line trucks. Though the D Line truck built good brand equity in the European market, the bankruptcy of Daewoo in 2000 affected the fortunes of the company. In 2005, SGM International, a subsidiary of Odien Capital Partners, L.P., took over the company and undertook an aggressive restructuring and investment programme resulting in the company’s revival and expansion of the product range to 12 tonnes.

“It is a very compelling fit. Ashok Leyland will gain a modern truck, design capabilities, and access to the European market and AVIA Truck Business Unit will gain a strategic parent resulting in significant savings in purchasing and access to Ashok Leyland’s existing markets. The strategic rationale and the combined capabilities under Ashok Leyland ownership have the potential to make AVIA Trucks a global player”, said Mr. Michael Saran, Chairman of AVIA, a.s

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