Car Importer Considering a Public Offering : Capital Needed to Push Yugo Subcompact Sales

Yugo America Inc., the importer selling a Yugoslavian subcompact car for under $4,000, is considering a public stock offering to raise additional working capital, company officials announced Friday.

A registration statement was to be filed with the Securities and Exchange Commission by the beginning of December, said Ira Edelson, vice chairman and chief financial officer of the company, based here.

Edelson would not say how much capital the company is hoping to raise, adding that “we have to be careful what we say before our plan is approved by the SEC.”

Shares could be available within 60 days of filing with the SEC, Edelson said.

Several million dollars from private investors was used to get the car certified to meet U.S. standards, said company President William Prior.

Sees a Great Demand

He said there is great demand for the Yugo, which retails for $3,990, or 26% less than comparable subcompact cars sold by U.S. and Japanese companies.

He said more than 1,000 Yugos have been sold in the United States since the car was first imported earlier this year. Prior said all Yugo dealerships are “oversold” for the rest of the year.

Yugo America buys the cars from Zavodi Crevna Zastava Co. in Yugoslavia. Prior said he hopes to import 40,000 this year and eventually expand to 100,000 vehicles per year.

Prior said that in 1983 his company began looking for a manufacturer that could build a car for under $4,500. He said he started his search after reading a study that said the average price of a new car is $10,000, a price that the average family can no longer afford.

The study said there was a great demand for basic transportation under $5,000.

After a year of searching, an agreement was reached with Zavodi, the 28th-largest car manufacturer in the world. The car’s cost is held down because the company, which is employee-owned, manufactures 90% of its parts and materials, said Prior.

Also, a Pay Difference

“The company has its own railroad, its own utility plant, its own plastics company,” he added.

In addition, an auto worker in Yugoslavia is paid an hourly wage of between 60 cents and $1, compared to $13 in Japan and $22 in the U.S., including benefits.

A few changes in the car were necessary to gain approval from the U.S. Department of Transportation, Prior said.

He said he wants the Yugo to take the place that Japanese cars and the Volkswagen once held in the marketplace.

“Our strategy over the long haul is to position the car so it is associated with a high degree of quality at a phenomenal price,” Prior said.

Yugo sales were going well at Ramsey Auto Imports, one of 50 distributors in the Northeast, said Leigh Rzasa, general sales manager.

“We are sold out six months in advance,” she said. With transportation and taxes, the car still costs under $4,500.

The company has promised each dealership 50 cars per month, which would reduce waiting time to 60 days, she said.