It's a tale out of Africa, but it could have been made for Hollywood. An ambitious, young mechanic buys a run-down fleet of trucks, then creates a thriving cargo-hauling business. Looking for a new challenge, he builds an auto plant and a string of dealerships. He angers rivals by offering deep discounts and superior service.
Finally - after suffering lawsuits, corruption investigations and a costly price-cutting war - our protagonist goes bankrupt. And let's not forget the rumors. Was he involved in the killing of a Daewoo executive? Did he really help finance an army in the Congo? Was he the victim of a Central Intelligence Agency plot?
It may sound like a movie script, but it's the true story of Billy Rautenbach. South Africa's business community still is picking up the pieces in the wake of the collapse of Rautenbach's automotive empire.
In January, Hyundai Motor Distributors - a partnership 50 percent owned by Rautenbach - went into liquidation, burdened by debts totaling $1.1 billion. The liquidation, which left showrooms across South Africa locked and empty, left 80,000 owners worried about warranties and service.
Hyundai Motor Co. has warned that it might not to honor the warranties of cars built in Rautenbach's assembly plant in Botswana. It's a major headache for the Korean automaker in a market that looked promising until Rautenbach's luck gave out.
Rautenbach was a Zimbabwean national who founded Wheels of Africa, a trucking company that hauled cargo throughout sub-Saharan Africa. Tall, flamboyant Rautenbach was a skilled mechanic. Years ago, he acquired a fleet of run-down Volvo trucks, which had been abandoned in Mozambique at the end of its guerilla war.
With the help of a friend, he repaired the vehicles. Then he won Volvo's franchise to distribute trucks and buses in the region. His Wheels fleet became a common sight, as massive convoys carried all kinds of loads across Africa.
Rautenbach expanded his empire, launching a mining venture in Zambia. He became close to Congolese president Laurent Kabila, who asked him to get the state-owned copper and cobalt mining operation back on its feet.
By now, Rautenbach's investments spanned southern and central Africa, and he learned to enjoy his hard-earned wealth. He maintained a huge ranch outside the Zimbabwe capital Harare. Accompanied by his childhood-sweetheart wife, he used his company's Falcon jet to travel across Africa.
But Rautenbach's wealth did not dilute his ambition. When he announced that Wheels would assemble and distribute Hyundai cars, South Africa's automotive establishment was stunned.
Baiting the establishment
Long shielded from competition by sanctions against apartheid, the nation's auto industry had grown lazy. Productivity was low; automakers relied on large labor forces to offset a lack of automation.
Rautenbach founded Hyundai Motor Distributors, then sought a location for an assembly plant.
He chose Gaborone, the capital of Botswana, just across the South African border. With its low wages and weak unions, Botswana gave Rautenbach a major edge.
The key issue, however, was tariffs. South Africa's local content rules allowed Hyundai to import semi-knocked-down vehicles into the country from Botswana.
Semi-knocked-down production involves the installation of such items as engines, tires and headlights to an otherwise complete car. The vehicles were imported through Mozambique as fully assembled vehicles, stripped to comply with import rules, then shipped to Botswana, where they were reassembled.
Tariff loophole
Rautenbach paid a 23 percent import duty to bring the vehicles into Botswana, then exported the finished vehicles to South Africa, paying no additional tariff.
By contrast, local South African manufacturers paid a 115 percent tariff on imported cars. According to Business Times, this allowed Hyundai to offer accessories such as radio-cassette decks, electric windows and air conditioning as standard equipment.
Rival automakers howled in protest. Rautenbach also set up a network of dealerships that offered superior customer service. Unlike other automakers, HMD owned all of its 52 dealerships, 14 used-car outlets and 34 repair shops.
He stocked them with cars at 'no-haggle' prices as much as 20 percent cheaper than rival products. Unlike his rivals, he kept his dealerships open Sundays, and he offered customers three-year warranties.
But customers flocked to his dealerships, and Hyundai Motor Distributors grabbed a 10 percent market share.
Rautenbach and his team of renegade executives had little respect for their rivals. The first 18 months of HMD's existence had been marked by 'one long battle against dirty tricks from the competition,' said one Hyundai manager in 1996. 'We have simply been doing something any of them could have done if they had thought of it.'
HMD appeared to be a winner, and Rautenbach kept a high profile. From time to time, he raced cars as a member of Hyundai's rally team, a highly effective promotional tool in South Africa, where motorsports are popular.
Rivals retaliate
But Rautenbach's rivals soon retaliated. First, automakers went to court in an effort to force Hyundai dealerships to close Sundays. However, the judges ruled in favor of Hyundai.
But South African automakers did succeed in slamming shut the tariff loophole. Under pressure from the auto industry, the governments of South Africa and Botswana asked Hyundai to replace its original facility with a more costly 250 million rand ($40 million) plant.
The expansion enabled the plant to assemble complete-knockdown versions of the Accent, Elantra and Sonata. Production started at 30,000 units a year, and Hyundai executives planned to produce up to 100,000 units annually.
But Rautenbach's luck had begun to run out. The new plant was completed just as South African car sales declined.
Meanwhile, a price war launched by rival automakers in 1996 began to take eat HMD profits.
Under the financial burden of its new assembly plant and dealership network, HMD began to sink. In May 1999, two banks threatened to seize its assets. Rautenbach was bailed out when Hyundai Motor Corp. and a group of 10 financiers gave him cash.
In November, the South African business community was stunned by news that government investigators had searched Rautenbach's home and offices.
The prosecutor's office confirmed that it had searched an aircraft hangar housing a plane reportedly owned by Rautenbach. According to the prosecutor's office, Rautenbach allegedly embezzled $2.4 million from Hyundai Motor Distributors and Swedish Truck Distributors from 1994 through 1999.
Officials also investigated allegations of corrupt payments made to bank officials that had provided credit to HMD. Rautenbach stayed out of public view. 'He's down a mine in Zambia, waiting till it's safe to come out,' joked one senior industry figure in Johannesburg.
Bankruptcy
In January, Rautenbach liquidated six Wheels companies, including HMD. Sweden's AB Volvo is negotiating to buy the assets of Wheels' truck and bus companies for $11 million. Volvo 'gradually became aware the companies were in financial difficulties last year,' said Volvo director Lennart Jansson.
In February, the Imperial Group - one of the world's largest dealer chains - considered proposals to take over HMD.
Even as Rautenbach exited the auto industry, rumors about him grew wilder. On Jan. 7, the Financial Mail published an account of an intelligence report alleging that Rautenbach had been involved in the killing of Daewoo SA president Yong Koo Kwon.
According to the newspaper, an outraged Rautenbach said police never approached him. In truth, the sensational charges appeared to be flimsy, and Rautenbach found an ally in South Africa's High Court.
The court barred the national director of public prosecutions from making defamatory statements, and it ordered the government to return documents seized from Rautenbach's offices.
Oh, and the Central Intelligence Agency? Shortly after HMD caved in, South Africa buzzed with rumors that the CIA had framed Rautenbach. Supposedly the agency sought revenge after Rautenbach kept doing business with South Africa in the 1980s despite international trade sanctions.
Rautenbach's foray into the auto industry appears to be over. Maybe a scriptwriter is needed to invent a proper ending.
