Ambiguities of a Billion-Dollar Deal; How Did Kruz Become the Owner of Iran Khodro?

The ownership of Iran Khodro was finally transferred to the parts manufacturing group "Kruz" on February 6, after months of negotiations. Although the new owner of Iran Khodro is from the private sector, many express doubts about the legal history and competence of this company. Some members of parliament have voiced concerns over this transfer and questioned Kruz's background. They have pointed out some of Kruz's legal convictions, casting doubt on the company's suitability to control Iran Khodro. Some experts do not consider Kruz a true representative of the private sector and believe this case, like past experiences of privatizing state-owned companies, will not be successful. Kruz has been gradually buying shares of Iran Khodro for years, and this process culminated on February 6 when it acquired the majority of shares by purchasing what is termed a "management block." Two days before the transfer, Iranian media published a letter from the Supreme Council for Economic Coordination of the three branches of government, indicating that the leaders had agreed to the sale of shares of Iran Khodro. However, the letter did not mention Kruz, and thus opponents attempted to postpone the meeting based on a ruling from the Competition Council, which had not approved the "membership and competence" of this company for the share transfer meeting. Consequently, the meeting was initially delayed but unexpectedly took place after a seven-hour delay. While the meeting was supposed to start in the morning of February 6, Kruz announced via a handwritten letter in the "Codal" system that it would not hold the meeting due to "disagreements among major shareholders" and "intervention by judicial authorities"; however, the assembly was held that evening, and it was announced that Kruz had secured three out of five management seats at Iran Khodro through voting, thereby taking control of the company. Before the transfer meeting, Kruz held approximately 30% of the shares and two seats on the five-member board of directors of Iran Khodro. The company offered to buy the block of shares at 480 tomans per share, while the current price of each share of Iran Khodro on the Tehran Stock Exchange is close to 345 tomans. After one day of the meeting, Iranian media published a letter from the Deputy Attorney General to the Minister of Industry, Mining, and Trade, indicating that the prosecution had requested the Competition Council's opinion. IRNA news agency reported that Farshad Moghimi, the Deputy Minister of Industry, had told Iran Khodro shareholders to halt the assembly for the company transfer before it took place. Ali Mardan Azimi, the CEO of Iran Khodro, sent a letter to the Iranian Securities and Exchange Organization after the assembly, reporting "violations" during the general assembly and stating that "the Securities Organization should not approve the transfer of Iran Khodro to the private sector." Azimi even went so far as to lock the management building to prevent the new managers from entering. This led to the new board members filing complaints against him for "attempted wrongful possession" and "interference and obstruction of rights." Ali Alilou, a former member of the parliamentary investigation committee on automakers, also declared the transfer meeting of Iran Khodro illegal and told the Tasnim news agency, close to the Revolutionary Guards, that the "membership and competence" of the organizers of the Iran Khodro assembly had previously been revoked by the Competition Council. Despite all the opposition and contradictions in the information regarding the results of the share transfer meeting, government officials have not reacted to the details of the Iran Khodro transfer. It is said that the support of Abdolnasser Hemmati, the Minister of Economy, for the transfer of Iran Khodro has allowed Kruz to win the management share transfer meeting despite all pressures. Kruz emerged in 1981 with private ownership and claims to meet about 30% of the parts needs of Iranian automakers, making it one of the main suppliers in this industry in Iran. Kruz's influence has not been limited to parts supply; the company has made significant investments in the automotive industry through its subsidiaries, previously owning 62% of the shares of "Baham Manufacturing" and 31% of the shares of "Sepehr Kish". However, the activities of this parts giant have not been without controversy. Kruz has faced various accusations, from organized smuggling of car parts to violating workers' rights in factories. Additionally, another case brought Kruz into the spotlight: "paying bribes" to Hossein Fereydoun, the brother of former President Hassan Rouhani, allegedly to cover campaign expenses. Fereydoun, who served as his brother's special assistant during his presidency, had previously faced allegations of financial corruption. In 2021, Kruz was tried during the formation of a case for widespread violations, with accusations including large bribes, selling parts at inflated prices to automakers, financing certain electoral candidates, and producing defective parts. Opponents of the transfer of Iran Khodro to Kruz refer to the company's previous attempts to create a shell company for ownership of Iran Khodro, a matter that has also been raised in court. One of the accusations against Kruz in the court presided over by Abolqasem Salavati was the illegal influence of this company in the management structure of Iran Khodro. The prosecutor stated that Kruz, through the "Tadbir Sarmayeh" company, acquired 11.32% of Iran Khodro's shares and attempted to place one of its affiliates on the board of directors of this automaker. This accusation, according to the prosecutor, contradicts the country's "competitive regulations" and has also been confirmed by the Competition Council. Furthermore, the prosecutor referred to Kruz's covert strategies to impose expensive parts on Iran Khodro. Based on evidence presented in the court session, this group established a shell company named "Pishgaman Golyar" to manage the shares purchased from Iran Khodro. Reports from the prosecutor's statements during Kruz's court session indicate that the company has also faced allegations of "lobbying in the media and government agencies" to gain influence and avoid legal scrutiny. Abolqasem Salavati claimed in the court session in 2021 that documents tracking the assets of Hamid Keshavarz, the CEO of Kruz, showed payments of 600 million tomans on November 22, 2015, and 290 million tomans on November 23, 2015, aimed at influencing elections. According to Judge Salavati, these accusations are not included in the indictment but demonstrate the defendant's "lack of honesty." On the other hand, the company has been accused of importing and producing defective parts, including non-standard ABS brakes and airbags, which have reduced the quality and safety of domestically produced vehicles. Hamid Keshavar, the CEO of Kruz, responded to these accusations by stating that he is not political and has no connections with politicians. He attributed the existence of these accusations to "ruthless competition among companies" and believes that the criticisms directed at Kruz are "illegal." The new consortium of shareholders of Iran Khodro announced after acquiring the company that "Iran Khodro's products will be worthy of the Iranian people." However, experts express doubts about whether the change in ownership will significantly impact product quality. Although on paper, most shares of Iran Khodro are now in the hands of the private sector, some who do not consider Kruz a true representative of the private sector suspect that the privatization of Iran Khodro will face the same fate as other privatizations in Iran. Structural problems in Iran's automotive industry, import bans, international sanctions, price controls, and government intervention in recent years have led to increasing dissatisfaction among consumers regarding the quality and price of cars in Iran. Some experts believe that the only solution to get Iran Khodro out of losses and improve product quality is to partner with foreign automakers, but international sanctions have hindered this partnership.