Ford’s announcement to shut down its factories in Brazil, where it operated for over a century and had the largest assembly plant in Latin America, caused more than one regional assembly to rip its clothes and corner the giant against the cords of an economy in recession. that has more than 14 million unemployed on the brink of collapse.
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Ford’s departure will leave more than 5,000 more unemployed people in Brazil and Argentina, leading to social unrest and a government crisis for President Jair Bolsonaro, who has done nothing to stop major auto companies like Ford, Mercedes-Benz and possibly Audi. , they will look for better winds in a world where the economy has been hit and vulnerable by the pandemic, experts expect.
“Ford stops car production in Brazil as it restructures its global production and because the operation has been causing losses here for a long time, as the situation was exacerbated by the unfavorable economic environment caused by the pandemic, ”noted Brazilian analyst Mario Osava tells EL TIEMPO.
Although he admits that the announcement caused great surprise, he confirms that it was another announced chronicle. “Two years ago, Ford deactivated its historic factory in São Bernardo do Campo (Brazil’s former auto capital) and the company showed little enthusiasm for staying here.”
According to the National Association of Motor Vehicle Manufacturers, car sales in Brazil fell by 26.2 percent in 2020.
The carmaker’s departure is not expected to be the first chapter on Brazil’s deindustrialization, nor the last if Bolsonaro’s government does nothing to contain the tsunami triggered by the age-old company.
Audi will probably also leave in the coming days andSome predict that China will be able to fill the void Ford is leaving in Brazil, as Bahia governor Rui Costa announced he will negotiate with the Chinese to occupy the closed factory in Camaçari. industrial municipality of the state of Bahia, close to the capital Salvador.
Others estimate that Mexico would be the biggest beneficiary of the Brazilian auto industry’s decline because it is geographically better located, has lower labor costs and broader trade deals.
Regional, Ford was forced to reassure dealers and assured them in a letter the Colombians received that the car company “remains committed to the customers of South America, with a lean and sustainable business model built on the line of iconic vehicles, connectivity and electrification” and that it will be actively present in its market and serve its customers with a portfolio of modern and connected commercial vehicles, trucks and SUVs ”.
Also that from now on it will focus its portfolio on its global strengths such as mid-sized pickup trucks, a new Ranger, and that it will serve customers in the region “with attractive global products such as Explorer, F150, Mustang, Bronco, Territory. and others.” .
Likewise remains committed to its “dealers and customers” who “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 fulfills all its obligations. “We will work closely with our dealer network to mitigate the impact and develop plans to achieve a long-term sustainable business. Our full market representation and commercial teams will be available to support them during this time ”.
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A Ford dealer, who asked not to be identified, told this newspaper that the automaker is not leaving Brazil and will continue its commercial activities, as happened in Colombia with the CCA, which left Mazda production but continued commercialization and got stronger.
“The Brazilian factories were a major source of supply, but Ford has six additional sources for Colombia, including Canada, Argentina, the United States, Thailand and Mexico. We will have a problem for a while, but I’m sure it will be resolved soon, ”he said.
He also recalls that in Colombia “Ford’s Brazilian product has a stake of less than 25-30 percent in units. In value it’s lower, about 18-20 percent ”and ended the year with unit sales down 28 percent compared to 2019, according to the Runt registry published by Fenalco.
No exit
Ford’s decision was the only way out the company had from a business and economic survival standpoint, experts agree. The automaker, which will maintain small production in Argentina and Uruguay, said through Jim Farley, president and CEO, that Although Ford has been present in South America and Brazil for over a century, exit was a decision that had to be made. “They are very difficult, but necessary to create a healthy and sustainable business,” he said.
In the letter to regional dealers, Ford explained that “Ford South America has suffered significant losses since the 2013 economic crisis” and that the parent company had to bear the deficit.
Also that the recent devaluation of the region’s currencies has pushed industrial costs to irreparable levels and that the global pandemic has exacerbated the region’s difficulties, especially in Brazil, and that as a result and at the same time your business requires “significant investment in new technologies to meet consumer demands and the regulations that are redefining the industry ”.
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But analyst Fausto Oliveira confirms that it’s not just the more than 5,000 direct jobs that are being lost. “It’s the even greater disorganization of the supply chain, the fragmentation of the lessons gathered over decades of local work, the reinforcement of the false idea that industry and Brazil don’t coincide. At the heart of the problem lies in the original industrial policy and its derivative policies that sought to establish an automotive sector in the country. Luxury car brands are leaving Brazil because of a well-intentioned but misguided government policy: car imports were taxed with an additional 30 percentage points of the industrial production index (IPI), facilitating the opening of new factories in Brazil for multinationals ”.
The problem lies precisely in the surplus of existing technicians and in the limited Brazilian market, between 3.5 and 4 million units per year. There are 31 in total, if you include those of cars, trucks, buses and mobile agricultural machinery with wheels.
“In Brazil there are all car brands: the traditional four: General Motors, Ford, Volkswagen and Fiat, plus the Japanese, Chinese, Korean, other European, etc. The specialists always said there was no market for so many. With the economic recession since 2015 and now the pandemic, that truth reigned: there is no market, ”says Osaba.
Brazil was reproducing politics
original industrialist to lure carmakers into the country, believing the multiplier effect would repeat, but he was wrong
If it had conditions, it wouldn’t be too much to think that Brazil could become a major exporter, as it once was to Latin America, some Arab and African countries, which import little from the start, but ‘the production in Brazil is not competitive, survives from many grants and incentives (national and local). The costly and confusing tax system has been cited as a negative factor. Also the cost of energy ”, he adds.
Oliveira recalls that the main decisions taken by multinationals in sectors such as the automotive industry relate to the economics of demand and market outlook as well as the company’s strategy.
Ford’s decision to turn off the lights early in Brazil, according to you, was influenced by “insufficient chronic demand, which in turn responds to the new macroeconomics of the recession that has passed through ”.
And he argues that capitalism lives on aggregate demand and, as Brazil began to record zero growth after its worst recession since 2015, “ now, with no tariff incentive to produce here, and no demand, carmakers could be expected to start leaving. ”.
Ford’s departure is the result of “an industrial policy designed entirely from the perspective of global value chains, which dared not think beyond the multinationals. And so, in the second decade of the 21st century, Brazil replicated the original industrial policy of luring car manufacturers to the country, believing the multiplier effect would be repeatedBut 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 smaller and no bigger today than in theory should have been with the arrival of eight new factories: the van Chery, FCA, Nissan, BMW, Jaguar Land-Rover, Hyundai, Mercedes-Benz and Audi.
Unions, in battle
For the workers of Brazil, Ford’s announcement is disastrous, which is why the largest metallurgical unions declared themselves in a fight and held Bolsonaro’s government accountable for what is happening. “Brazil without direction, without industry, without employment, without government and without future,” the two main unions headlined a statement.
Confirm that Ford’s decision ‘means approximately 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 that there is absolutely no project to reactivate the Brazilian economy, including the re-industrialization of the country ”. They accuse the government of ignoring the importance of industry as a driver of national development, failing to present a strategy for industry performance, and condemning Brazil to deindustrialization and divestment.
“At a time when the global auto industry is experiencing one of the most intense waves of transformation, led by electrification and connectivity, we are witnessing the criminal negligence and even the boycott of the Brazilian government subordinate to the industry, with damaging effects. for the working class, for a president who is unable to talk about the integration of the country in a scenario that is changing at great speed ”.
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Please confirm that “the tragedy is even more evident given the number of factories closed or with the announcement of closure since 2019, and the impact on the various sectors of Brazilian industry, accelerating and dramatically deteriorating our economic position on the world stage. Mismanagement plunges our population even further into the roadmap of insecurity, unemployment, discouragement and poverty ”.
Brazilian analysts insist that this should lead to in-depth reflection and immediate action from the government, because of the way it conducts economic policy in these times when things are changing at a rapid pace. Oliveira says the big lesson comes from India.
There, Ford announced in December that it would exit a joint venture with national automaker Mahindra for business strategy reasons similar to those it employed here. But this announcement did not affect India as it concerns us, because the Indians have an auto industry, while here we only invited car manufacturersTo do it.
GLORIA HELENA REY
For the time