Ford closes operations in Brazil: another mistake by Jair Bolsonaro? – Latin America – International


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 their clothes and cornered the giant against the ropes of an economy in recession. which has more than 14 million unemployed on the brink of the abyss.

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Ford’s exit will leave more than 5,000 more unemployed in Brazil and Argentina, unleash social unrest and a government crisis for President Jair Bolsonaro, who has done nothing to stop large auto companies like Ford, Mercedes-Benz and possibly Audi. , they will go looking for better winds in a world with the economy hit and fragile by the pandemic, experts anticipate.

Ford stops producing cars in Brazil because it is restructuring its global production and because the operation here had been causing losses for a long time because the situation was aggravated by the unfavorable economic environment produced by the pandemic, ”the renowned Brazilian analyst Mario Osava tells EL TIEMPO.

Although he admits that the announcement caused great surprise, he affirms that it was another advertised chronicle. “Two years ago, Ford deactivated its historic plant in São Bernardo do Campo (the former automotive capital of Brazil) and the company had been showing little enthusiasm to remain here.”

According to the National Association of Motor Vehicle Manufacturers, car sales in Brazil fell 26.2 percent in 2020.

It is anticipated that the exit of the automaker will not be the first chapter on the deindustrialization of Brazil nor the last if the Bolsonaro government does nothing to control the tsunami caused by the century-old company.
It is likely that in the next few days Audi will also leave andSome predict that China will be able to fill the void that Ford is leaving in Brazil, as Rui Costa, governor of Bahia, announced that he will negotiate with the Chinese the occupation of the closed plant in Camaçari, industrial municipality of the state of Bahia, close to the capital, Salvador.

Others estimate that Mexico would be the great beneficiary of the decline in the Brazilian automotive industry, because it is geographically better located, has lower labor costs and broader trade agreements.

Regionally, Ford was forced to reassure dealers and assured them in a letter, which the Colombians received, that the automotive company “remains committed to the clients 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, serving 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 medium-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, that will remain committed to its “dealers and customers”, which 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 be working closely with our dealer network to mitigate the impact and develop plans to achieve a long-term sustainable business. Our entire Market Representation area 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 operation, as happened in Colombia with the CCA, which left Mazda’s manufacturing but continued with its commercialization and became stronger.

“The factories in Brazil 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 resolved soon, ”he said.

He also remembers that in Colombia “Ford’s Brazilian product has a participation of less than 25 – 30 percent in units. In value it is lower, around 18-20 percent ”and that the year closed with sales in units decreasing by 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 the point of view of business and economic survival, specialists agree. The automaker, which will maintain a 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 more than a century, 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 the letter to regional dealers, Ford explained that “since the 2013 economic crisis, Ford South America accumulated significant losses” and that the parent company had to support the deficit.

Also that the recent devaluation of currencies in the region increased industrial costs to unrecoverable levels and that the global pandemic amplified the difficulties in the region, especially in Brazil, and that, consequently and at the same time, your business requires “significant investments in new technologies to meet consumer demands and the regulations that are redefining the industry ”.

(Read also: Bolsonaro insists that there was fraud in the US elections.).

But the analyst Fausto Oliveira affirms that it is not only the more than 5,000 direct jobs lost. “It is the even stronger disorganization of the supply chain, the dispersion of the lessons accumulated in decades of local work, the reinforcement of the false idea that the industry and Brazil do not coincide. The heart of the problem is in the original industrial policies and the derived policies that tried to establish an automotive sector in the country. Luxury car brands are leaving Brazil due to a well-intentioned, but misguided public policy: car imports were taxed with an additional 30 percentage points of the industrial production index (IPI), thus facilitating the opening of new factories in Brazil multinationals ”.

The problem lies precisely in the excess of existing assemblers and in the limited Brazilian market, between 3.5 and 4 million units a year. There are a total of 31, if you count those of cars, trucks, buses and mobile agricultural machines with wheels.

“In Brazil there are all the car brands: the traditional four: General Motors, Ford, Volkswagen and Fiat, plus the Japanese, Chinese, Korean, other European, and so on. The specialists always said that there was no market for so many. With the economic recession since 2015 and now the pandemic, that truth prevailed: there is no market ”, says Osaba.

Brazil reproduced politics
original industrialist to attract automakers to the country, believing that the multiplier effect would repeat itself, but he was wrong

If it had conditions, it would not be an excess to think that Brazil could become a major exporter, as it was at one time to Latin America, some Arab and African countries, which import little from the beginning, but “production in Brazil is not competitive, survives on many subsidies and incentives (national and local). The costly and confusing tax system is pointed out as a negative factor. The cost of energy too ”, he adds.

Oliveira recalls that the major decisions made by multinationals in sectors such as the automotive industry involve both economic aspects related to demand and market prospects and the company’s strategy.

Ford’s decision to turn off the light early in Brazil, in your opinion, was influenced by “insufficient chronic demand, which, in turn, responds to the new macroeconomics of the recession that has been implemented ”.

And he argues that capitalism lives off aggregate demand and, as Brazil began to register zero growth after its worst recession since 2015, “now, without tariff stimulus to produce here, and without demand, it was to be expected that car manufacturers start to leave ”.

Ford’s exit is the result of “an industrial policy that was designed entirely from the perspective of global value chains, which did not dare to think beyond the multinationals. And so, in the second decade of the 21st century, Brazil replicated the original industrial policy of attracting car manufacturers to the country, believing that the multiplier effect would repeat itself”, But he was wrong, he says.

The Brazilian auto parts sector, created at the time of President Juscelino Kubitschek (1956-1961) as a response to the entry of multinationals, is today smaller and not larger than in theory it should have been with the entry of eight new factories: the from Chery, FCA, Nissan, BMW, Jaguar Land-Rover, Hyundai, Mercedes-Benz and Audi.

Trade unions on the fight

For the workers of Brazil, the Ford announcement is disastrous and, for that reason, the largest metallurgical unions declared themselves in a fight and held the Bolsonaro government responsible for what is happening. “Brazil without direction, without industry, without employment, without government and without future,” the two main labor unions headlined a statement.

Affirm that Ford’s decision “means around 50,000 jobs (direct and indirect) in the chain of production, sales, marketing and distribution of the three closed plants (…) 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 the industry as a motor of national development, of not presenting any strategy for the performance of the industry and of condemning Brazil to deindustrialization and divestment.

“At a time when the global automotive 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 subordinate to the industry, with damaging consequences for the working class, in front of a president incapable of talking about the insertion of the country in a scenario that changes at great speed ”.

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Affirm that “the tragedy is even more evident considering the set of plants closed or with the announcement of closure since 2019, and the impact on the different sectors of the Brazilian industry, which degrade our economic position on the global stage in an accelerated and dramatic way. Mismanagement plunges our population even further on the roadmap of precariousness, unemployment, discouragement and poverty ”.

Brazilian analysts emphasize that this should lead to deep reflection and immediate action by the Government, due to the way in which it is conducting economic policy in these times when everything is changing at great speed. Oliveira says that the great lesson comes from India.

“There, Ford announced in December that it would exit a joint venture with national automaker Mahindra, for corporate strategy reasons similar to those it applied here. But this announcement did not affect India as it affects us, because the Indians have an auto industry, whereas here we have only invited car manufacturersTo do it.

GLORIA HELENA REY
For the time

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