October 25, 2014
Argentina, Brazil set to ink auto deal
Woes in the industry continue as Honda, Volkswagen announce suspensions
The government agreed yesterday to sign a one-year deal with Brazil to regulate vehicle trade between both countries, after a meeting held between Industry Minister Débora Giorgi and her Brazilian counterpart, Mauro Borges. The agreement will be signed on June 11 in Buenos Aires.
Meanwhile, manifesting the auto sector’s current woes, Honda and Volkswagen yesterday announced a new round of suspensions at their factories, while the ADEFA car factory chamber reported a 36 percent drop in production.
The deal between the two governments implies that for every dollar Brazil imports from Argentina in the auto sector, it will export between US$1.6 and US$1.7, a source at the Brazilian government told Reuters. The agreement is more attractive for Argentina compared to the previous pact, which forced the government to import US$1.95 per dollar exported to Brazil.
Brazilian automaker chamber Anfavea wanted to raise the figure to US$2.05, while the Argentine government sought to lower it to US$1.3, according to Brazilian media. Nevertheless, both governments agreed to be more flexible in negotiations to reach an agreement.
The new deal only covers the real value of auto parts and components. The previous one also included the value of wages and marketing expenses, leaving the door open for companies to hire fewer local suppliers. It was signed only for one year, as the government seeks to receive guarantees from Brazil over readressing the trade balance currently favouring the latter, before signing a longer agreement.
No government source confirmed the news yesterday, but Cabinet Chief Jorge Capitanich said at a Congressional hearing that the government is getting ready for “imminent announcements” for the sector.
“We believe there’s a positive outlook, and we are working on several angles,” Capitanich said, hinting that the upcoming announcements would include not only the agreement with Brazil but also other moves that could benefit the auto-parts sectors and “domestic market prices.”
Japanese car and motorcycle maker Honda announced yesterday it will stop production for a month at its two plants in Florencio Varela and Campana, suspending 800 employees but paying them their full income while the measure lasts.
The measure was decided as result of the large stock of vehicles that have accumulated at the factories due to plunging sales.
Volkswagen followed the same path, deciding to halt the production of gearboxes at its Córdoba plant, affecting 900 workers who won’t go to the factory today or tomorrow. A deficit in auto parts to build the gearboxes was the reason behind the measure. The plant produces 3,640 gearboxes per day which are mostly exported.
Meanwhile, the SMATA auto workers union agreed with General Motors to accept a once-a-week suspension of 2,700 workers at plant in Alvear, Santa Fe, for the rest of the month, paying them their full wages during those days. The measure could be extended into July, if General Motors feels it is necessary.
“We will review the agreement every month. Things will depend on how the market unfolds. We could continue with the suspension plan until December. We have to be wise. For now, wages won’t be affected,” SMATA secretary Marcelo Barros said. “Car sales could react if the government reduces the tax on high end vehicles.”
The suspensions came on the back of ADEFA’s figures, which indicated that production dropped 36 percent in May compared to the same month last year, and decreased 13.9 percent compared to April. A total 50,938 units were manufactured, 30,130 of which were exported (39.2 percent less than the same month last year).
“Vehicle production has been seriously affected in the first five months of the year due to the drop in domestic demand and the level of exports,” ADEFA said in a press release. “Production volume was also affected by several conflicts registered by strategic suppliers, which led to a temporary suspension at their facilities.”
Wholesale figures showed a similar trend to production, with a 40.9 percent drop reported for May compared to the same month last year. The ACARA dealerships’ chamber also reported a 40 percent drop in retail sales last month.
Herald with Reuters, DyN