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Pablo de Sala
Pablo de Sala
Articles (9) 

The Dark Age for the Automotive Industry in Argentina

September 15, 2014 | About:

Diagnostic

Statistics have shown that during the first half of 2014, the sales for brand new cars dropped by 23 percent, while used car sales decreased by 9 percent in Argentina. These results were provided by the Automotive Commerce Chamber (CCA – Cámara del Comercio Automotor) and the Association for Automotive Dealerships (Acara – Asociación de Concesionarios de Automóviles).

The drops are thought to be in relation to the local demand that is way too low against the supply from the companies, which in many cases have started to increase their stock alarmingly.

Real and great concern

Most companies have started to develop contingency plans that include suspensions and dismissals. No company is safe from this situation, and this raises a huge distress due to the fact that more than 20,000 employees have been laid off, which contributes to the rise in the unemployment rate.

General Motors (NYSE:GM): 2,700 workers will be suspended one day a week.

Peugeot-Citroën (NASDAQ:UG): In its facility located in Villa Bosch, Buenos Aires, the company decided to suspend one of its two shifts. One thousand workers were affected by this resolution.

Volkswagen (VOW): A decision was made to halt the Friday production from the Pacheco facility (Buenos Aires) since May. VW stated that it has in stock more than 15,000 cars with no prospect of being sold. For that same reason, in addition to the previous measure, VW has also decided to design a plan for volunteer retirement.

Scania (SCVB): A company known for producing trucks and buses has also suspended 400 workers from the facility located in Tucumán.

Renault (RNO): In its facility located in Córdoba, the company had to suspend nearly 600 employees.

Fiat (FIAT): Since the beginning of the year, Fiat has suspended 2,100 workers from its facility located in Córdoba.

Iveco: In Ferreyra, a local town in Córdoba, Iveco decided to suspend 80 percent of its workers for two months.

One previous gear of this circuit

The autopart company called Montich has also been applying suspensions to its personnel. Its CEO, Ramón Ramirez, has acknowledged the crisis that is hitting the industry and has decided that Montich will start coping with the situation by reducing salaries and possibly a few dismissals.

Montich has a permanent plant of 490 employees and three facilities in Córdoba, Buenos Aires and Brazil.

Its main customers are Renault, Fiat and Iveco -- all companies going through the same crisis.

The crisis within this specific sector of the industry has a great impact on the companies previously mentioned. Official sources stated that between 2,000-2,500 employees were suspended, and some auto part companies have given their workers early licenses.

Auto dealerships

Due to the lack of activity and sales, many auto dealerships were obliged to close. High real estate costs, high maintenance costs, and the obligation to support salesmen and their salaries were the main factors that turned this decision.

During the first four months of the year, 272,095 cars were registered, which can be translated as a drop of 18 percent.

Kicillof calls on Brazil to increase purchases of Argentine cars

Argentina's Minister of Economy Axel Kicillof reported that since last year, Brazil increased its imports of autos from countries such as China, Japan and the nations of the European Union, and reduced vehicle imports from Argentina.

There is an urgent need to reduce the bilateral trade balance deficit for Argentina in about $3.1 million, of which $2.4 million correspond to red automotive sector.

In addition to the deficit of $3.1 million, official figures of the trade balance between Argentina and Brazil in 2013 show almost no growth in exports to Brazil, which totaled about $16.4 million last year, while imports increased by 10 percent in the year to reach 19.7 million. At that point the Argentine authorities, through the Minister of Industry Debora Giorgi, expressed the need for a more balanced agreement in the automotive sector. For the sale of finished cars there was a surplus of about  $400 million to Argentina, whereas imports from auto parts deficit reached 2.8 million.


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