A September 10 Bloomberg report stated that Tupy “is refusing new orders for engine blocks and heads”. How does this affect SinterCast and the six new CGI programs announced at the 20 April 2004 AGM?


Shareholder, name withheld

The short answer is that Tupy’s debt restructuring activities have no direct affect on SinterCast. The six programs announced at the 20 April 2004 AGM were all committed to before the debt restructuring. Tupy committed to the start-of-production and ramp-up of these programs based on its available/existing foundry capacity in both Joinville and Maua. The first of these six programs was alluded to in the Market Development section of the January-September 2004 Interim Report with a sentence approved by Ford’s Premier Automotive Group (PAG).

The situation regarding new block and head orders is based on two parallel factors:

  1. All funds that were previously targeted for new investment/expansion have been applied to the debt refinancing.
  2. The capacity of the Joinville and Maua foundries is already filled with current production and existing commitments for future production.

Considering items 1 and 2 above, Tupy’s current policy is that they will only accept new production orders if the OEM will provide the investment required to increase the capacity. If the Joinville and/or Maua foundries were not already at full capacity, Tupy could continue to accept new orders. However, full capacity is a ‘problem’ that every foundry strives to achieve. As a result of the good foundry utilisation, Tupy was profitable during 2003 and also forecasts a profit for 2004.

The six CGI programs referred to at the SinterCast AGM were committed to based on the existing foundry capacity. These programs will proceed according to the original schedule established by the OEMs. All production programs (both the start-of-production and their public announcement) are determined by the OEM, not the foundry. The Tupy debt refinancing has no negative affect on SinterCast.