Ford’s announcement to close its facilities in Brazil, where it operated for more than a century and had the largest assembler in Latin America, tore apart the garments of more than one regionally and cornered the giant against the ropes of a recessionary economy, which has more than 14 million unemployed on the brink of the abyss.
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Ford’s departure 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 automotive companies like Ford, Mercedes-Benz and possibly , Audi, are looking for better winds in a world with the economy hit and weakened by the pandemic, experts anticipate.
“Ford is no longer producing cars in Brazil because it is restructuring its global production and because the operation here was giving 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 TEMPS.
While acknowledging that the announcement caused a great deal of surprise, he claims it was another announced chronicle. “Two years ago, Ford shut down its historic plant in São Bernardo do Campo (Brazil’s former automotive capital) and the company had been showing little enthusiasm for staying 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 departure 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 centennial company.
It is likely that in the coming days will also go Audi and, Some predict that China will be able to fill the gap 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, near the capital, Salvador.
Others believe that Mexico would be the big beneficiary of the decline of the Brazilian automotive industry, because geographically it is better located, has lower labor costs and broader trade agreements.
Regionally, Ford was forced to reassure dealers and assured them in a letter, received by Colombians, that the automotive company “remains committed to South American customers, with a slim 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, vans and SUVs.”
Also, that from now on it will focus its portfolio on its global strengths such as medium pick-ups, a new Ranger, and that it will serve customers in the region “with attractive global products such as the Explorer, F150, Mustang, Bronco , Territory and others “.
Likewise, that will remain committed to its “dealers and customers”, which will keep “sales operations, service, spare parts and warranties fully operational” and that it will launch new products.
He acknowledges the impact of his decisions on the region and assures that he will honor all his obligations. “We will be working very 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 sales teams will be available to support you during this time. 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 CEC, which left Mazda manufacturing but continued its marketing and strengthened.
“Brazil’s factories have been an important source of supply, but Ford has 6 additional sources for Colombia, including Canada, Argentina, the United States, Thailand and Mexico, among others. We will have some problems for a while, but I’m sure it will be resolved soon, ”he said.
He also recalled that in Colombia “Ford’s Brazilian product has a share of less than 25 – 30 percent in units. In value is lower, about 18-20 percent” and that the year goes close decreasing unit sales by 28 percent, compared to 2019, according to the Runt record released by Fenalco.
no way out
Ford’s decision was the only way out for the company in terms of business and economic survival, experts 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 over 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 the letter to regional dealers, Ford explained that “since the 2013 economic crisis, Ford South America has 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 investment in new technologies to meet consumer demands and regulations that are redefining the industry. “
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But analyst Faust Oliveira says it’s not just 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 lying idea that industry and Brazil do not coincide. The crux of the problem is in industrial policies The luxury car brands are leaving Brazil because of a well-intentioned but wrong public policy: the import of cars was taxed at 30 percentage points. of the industrial production index (IPI), thus facilitating the opening of new multinational factories in Brazil. “
The problem is precisely in the excess of existing couplers and in the limited market of Brazil, between 3.5 and 4 million units per year. There are a total of 31, if we 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, Korean, other Europeans, etc. The specialists always said that there was no market for With the economic recession since 2015 and now the pandemic, this truth was imposed: there is no market, “says Osaba.
Brazil reproduced politics
original industrial industry to attract car manufacturers to country, believing that the multiplier effect would 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 was at one time to Latin America, some Arab and African countries, which matter little from the origins, but “production in Brazil it is not competitive, it survives thanks to many subsidies and incentives (national and local). The tax system, expensive and confusing, is pointed out as a negative factor. The cost of energy too, “he adds.
Oliveira recalls that the major decisions taken by multinationals in sectors such as the automotive industry, involve both economic aspects related to demand and market prospects and those of the company’s strategy.
Ford’s decision to turn off the lights in Brazil earlyIn your opinion, was influenced by “chronic insufficient demand, which, in turn, responds to the new macroeconomy 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 its worst recession since 2015, “now, with no tariff stimulus to produce here, and no demand, it was to be expected that car manufacturers are starting to leave. “
Ford’s departure 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 multinationals. And so, in the second decade 21st century, Brazil reproduced the original industrial policy of attracting car manufacturers to the country, believing that the multiplier effect would be repeated“But he was wrong, he says.
The Brazilian auto parts sector, created in the time of President Juscelino Kubitschek (1956-1961) in response to the entry of multinationals, is today smaller and not as large as in theory it should have been with the entry of eight new factories: those of Chery, FCA, Nissan, BMW, Jaguar Land-Rover, Hyundai, Mercedes-Benz and Audi.
Unions, struggling
For Brazilian workers, Ford’s announcement is disastrous, which is why the major metallurgical unions declared themselves at war and blamed the Bolsonaro government for what was happening. “Brazil has no direction, no industry, no job, no government and no future,” the two main workers’ unions said in a statement.
they claim that Ford’s decision “means around 50,000 jobs (direct and indirect) in the chain of production, sales, commercialization and distribution of the three closed plants (…) The closing of the factories evidences the total absence of a project to reactivate the Brazilian economy, that contemplates the reindustrialización of country “. They accuse the Government of ignoring the importance of industry as an engine of national development, of failing to present any strategy for the development 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 boycott, of the Brazilian Government subordinated to the industry, with detrimental consequences for the working class, in the face of a president unable to dialogue on the insertion of country in a rapidly changing scenario. “
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They claim that “the tragedy is even more evident considering the set of plants closed or with the announcement of closure from 2019, And the impact on the different sectors of Brazilian industry, which degrade our economic position on the global stage in an accelerated and dramatic way. Mismanagement plunges our population even further into the roadmap of precariousness, unemployment, discouragement and poverty. “
Brazilian analysts emphasize that this must lead to deep reflection and immediate action by the Government, due to the way it is conducting economic policy in these times when everything is transforming at a rapid pace. Oliveira says the great lesson comes from India.
“There, Ford announced in December that it would step out of a business alliance with national automotive Mahindra, for corporate strategy reasons similar to those it implemented here. But this announcement did not affect India as it affects us, because Indians have an automotive industry, while here we have only invited car manufacturers“To do it.
GLORIA HELENA REY
For THE TIME