Zemen Bank SC is looking to foreclose on the first Ethiopian car assembly, Holland Car for defaulting on a loan arrangement according to sources at the bank.

Holland Car has fallen notably behind on loan payments and has failed to respond to repeated cautions from the bank according to sources.

The auto assembler was particularly affected by the 20% devaluation of the birr against the dollar in September of 2010, as the contract it had signd with customers in 2009-2010 did not foresee the devaluation and the ensuing price escalation explained sources.

Increases in transportation cost, escalation of the price of spare parts from the suppliers, increase in custom charges and delays in accessing Letters of Credit for foreign currency from local banks were also factors that contributed to the company defaulting on its loan payments the sources added.

Zemen bank has yet to make the decision to begin the foreclosure process but it will be left with little option should the company continue to default according to bank officials.

Holland Car was launched in 2005 as the joint venture of Engineer Tadesse Tessema and Dutch investor Trento Engineering to supply assembled vehicles for the  domestic and export markets. The company was established with an initial capital of 11 million Birr equally contributed by both partners.

Source: Capital