Ford’s announcement to close its facilities in Brazil, where it operated for more than a century and had the largest assembly plant in Latin America, caused more than one regional manufacturer to tear its clothes and corner the giant. against the ropes of a recessionary economy. which has over 14 million unemployed at the edge of the abyss.
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Ford’s departure will leave more than 5,000 unemployed in Brazil and Argentina, unleash social unrest and a government crisis for President Jair Bolsonaro, who has done nothing to stop big car companies like Ford, Mercedes-Benz and possibly Audi . , will look for better winds in a world with a pandemic-affected and fragile economy, experts anticipate.
“Ford stops producing cars in Brazil because it is restructuring its global production and because the operation here caused long-term losses, because the situation was aggravated by the unfavorable economic environment caused by the pandemic “, said for EL TIEMPO the famous Brazilian analyst Mario Osava.
Although he admits that the announcement caused a big surprise, he states that it was another advertising chronicle. “Two years ago, Ford shut down its historic factory in São Bernardo do Campo (Brazil’s former car capital), and the company was a little excited to stay here.”
According to the National Association of Car Manufacturers, car sales in Brazil fell by 26.2% in 2020.
It is anticipated that the carmaker’s exit will not be the first chapter on Brazil’s deindustrialization, nor the last if the Bolsonaro government does nothing to control the tsunami caused by the century-old company.
Audi is likely to leave in the next few daysSome predict that China will be able to fill the gap that Ford is leaving in Brazil, as Rui Costa, the governor of Bahia, announced that he will negotiate with the Chinese the occupation of the closed factory in Camaçari, industrial municipality of the state of Bahia, close to the capital, Salvador.
Others believe that Mexico would be the big beneficiary of the decline of the Brazilian car industry, because it is better located geographically, has lower labor costs and broader trade agreements.
Regional, Ford had to reassure the dealers and assured them in a letter, which the Colombians received, that the car company “remains committed to customers in South America, with a weak and sustainable business model built on the line of iconic vehicles, connectivity and electrification.” and that “it will be actively present in its market, offering its customers a portfolio of modern, connected commercial vehicles, trucks and SUVs”.
Also, that from now on it will focus its portfolio on its global strengths, such as medium-sized vans, a new Ranger and that it will serve customers in the region “with attractive global products such as Explorer, F150, Mustang, Bronco, Territory and other”. .
Same, that will remain committed to its “dealers and customers” who will keep “sales, service, spare parts and warranties fully operational” and that it will launch new products.
It recognizes the impact of its decisions on the region and ensures that it will honor all its obligations. “We will work closely with our dealer network to mitigate the impact and develop plans for a long-term sustainable business. Our entire market representation area and sales teams will be available to support them during this time. ”
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A Ford dealer, who asked not to be identified, told the newspaper that the carmaker was not leaving Brazil and would continue his business. as was the case in Colombia with the BCC, which left Mazda production but continued marketing and became stronger.
“Brazilian factories have been an important source of supply, but Ford has six additional sources for Colombia, including Canada, Argentina, the United States, Thailand and Mexico, among others. We will have a problem for a while, but I am sure it will be solved soon, “he said.
He also recalls that in Colombia “the Brazilian product Ford has a share of less than 25-30 percent in units. In value it is lower, around 18-20 percent ”and that the year ended with sales in units decreasing by 28 percent, compared to 2019, according to the Runt register published by Fenalco.
No Exit
Ford’s decision was the only way out for the company in terms of economic and economic survival, experts agree. The automaker, which will maintain low production in Argentina and Uruguay, said through Jim Farley, president and CEO, that Although Ford has been present in South America and Brazil for more than a century, the exit is a decision that had to be made. “They are very difficult, but necessary, to create a healthy and sustainable business,” he said.
In a letter to regional dealers, Ford explained that “since the 2013 economic crisis, Ford of South America has accumulated significant losses” and that the parent company had to sustain the deficit.
Also, that the recent devaluation of currencies in the region has increased industrial costs to unrecoverable levels and that the global pandemic has exacerbated the difficulties in the region, especially in Brazil, and that, consequently, Your business requires “significant investment in new technologies to meet consumer requirements and regulations that redefine industry ”.
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However, analyst Fausto Oliveira says that it is not just the more than 5,000 direct jobs lost. “It is the even stronger disorganization of the supply chain, the dispersion of lessons learned in decades of local work, the strengthening of the false idea that industry and Brazil do not coincide. The heart of the problem lies in the original industrial policies and derivative policies that tried to establish a car sector in the country. Luxury car brands are leaving Brazil because of a well-intentioned but wrong public policy: car imports have been taxed at an additional 30 percentage points from the Industrial Production Index (IPI), facilitating the opening of new multinational factories in Brazil.
The problem lies precisely in the excess of existing assemblers in the limited Brazilian market, between 3.5 and 4 million units per year. In total there are 31, if you count those of cars, trucks, buses and mobile agricultural machines with wheels.
“In Brazil there are all brands of cars: the four traditional ones: General Motors, Ford, Volkswagen and Fiat, plus the Japanese, Chinese, Koreans, other Europeans, etc. Experts have always said that there is no market for so many. With the economic recession of 2015 and now the pandemic, that truth prevailed: there is no market “, says Osaba.
Brazil reproduced politics
original industrial to attract car manufacturers in the country, believing that the multiplier effect will be repeated, but he was wrong
If it had conditions, it would not be an exaggeration to think that Brazil could become a major exporter, as it once was in Latin America, some Arab and African countries, which import little from the beginning, but “the production in Brazil it is not competitive, it survives thanks to many subsidies and incentives (national and local). The expensive and confusing tax system is highlighted as a negative factor. And the cost of energy, ”he adds.
Oliveira recalls that major decisions taken by multinationals in sectors such as the automotive industry involve both economic issues related to demand and market prospects, as well as the company’s strategy.
Ford’s decision to turn off the light early in Brazil, in your opinion, was influenced by “chronic insufficient demand, which, in turn, responds to the new macroeconomics of the recession that has been implemented ”.
And he argues that capitalism lives on aggregate demand, and as Brazil began to record zero growth after the worst recession in 2015, “now, with no tariff incentives to produce here and no demand, it was to be expected that carmakers would start leaving ”.
Ford’s exit is the result of “an industrial policy that was conceived entirely from the perspective of global value chains, which did not dare to think beyond multinationals. And so, in the second decade of the 21st century, Brazil replicated the initial industrial policy of attracting carmakers to the country, believing that the multiplier effect would be repeated“But he was wrong,” he says.
The Brazilian auto parts sector, created during the time of President Juscelino Kubitschek (1956-1961) in response to the entry of multinationals, is today smaller and not larger, because in theory it should have been with the entry of eight new factories: from Chery , FCA, Nissan, BMW, Jaguar Land-Rover, Hyundai, Mercedes-Benz and Audi.
The unions, up in battle
For workers in Brazil, the Ford announcement is disastrous, and for this reason, the largest metallurgical unions have declared a struggle and blamed the Bolsonaro government for what is happening. “Brazil without direction, without industry, without employment, without government and without future,” said the two main unions.
You state that Ford’s decision “means about 50,000 jobs (direct and indirect) in the chain of production, sales, marketing and distribution of the three closed factories (…) The closure of the factories shows the total absence of a project to reactivate the Brazilian economy, which includes the reindustrialization of the country ”. They accuse the government of ignoring the importance of industry as an engine of national development, of not presenting any strategy for industry performance, and of condemning Brazil to deindustrialization and divestment.
“At a time when the global car industry is going through one of the most intense waves of transformation, guided by electrification and connectivity, we are witnessing the criminal omission and even the boycott of the Brazilian government subordinated to the industry, with harmful consequences. for the working class, in front of a president unable to talk about the insertion of the country in a scenario that is changing at great speed ”.
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You state that “the tragedy is even more obvious considering the set of plants closed or with the announcement of the closure of 2019, and the impact on the various sectors of Brazilian industry, which degrades our economic position on the global stage in an accelerated and dramatic way. Improper management plunges our population further into the roadmap of precariousness, unemployment, discouragement and poverty.
Brazilian analysts point out that this should lead to deep reflection and immediate action by the government, due to the way it conducts economic policy in these times when everything is changing at a rapid pace. Oliveira says the great lesson comes from India.
“There, Ford announced in December that it would leave a joint partnership with domestic carmaker Mahindra, for corporate strategy reasons similar to those it has applied here. But this announcement did not affect India as it affects us, because the Indians have an automotive industry, while here we only invited car manufacturersTo do it.
GLORIA HELENA REY
For the time being