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Crisis? What Crisis, Asks Brazil's Auto Industry

Fiat truck The financial crisis hitting the world has lit a warning light for the Brazilian auto industry, after all, the sector is very global. This does not mean, however, that the companies are pessimistic about the national market. On the contrary, with almost identical points of view, several carmakers installed in Brazil guarantee that their model investment and release program should be maintained.

"The Chinese ideogram for the word 'crisis' also represents 'opportunity'," summed up the vice president at General Motors Brazil, José Carlos Pinheiro Neto, in a press conference at Anhembi Exhibition Pavilion, to present the company stand at the 25th International Automobile Trade Show, which opens to the public on the October 30.

In all, 12 carmakers announced their novelties at the Salon alongside their perspectives for the market. "We can see the crisis in two ways: seeing the cup half empty or half full," said the president of GM Brazil and Mercosur, Jaime Andila.

"Brazil is going to suffer an impact, but it should be small, as the country is greatly prepared to face the challenges and has companies compromised with the country's future and with the future of the auto industry," he added, repeating a statement that is almost unanimous among executives in the sector.

In the case of GM, the directors believe that, after record production of around 3 million vehicles in 2008 (by all carmakers), the market should still have good results in 2009 and grow sustainably in the long term. The national industry is now in seventh or sixth place among the largest in the world and, to General Motors, Brazil is the third main market. When considering just the Chevrolet brand, the country is the second main market.

Today, according to Andila, the main problem is credit. The vehicle market had been working with low interest rates and long payment schedules. Now the financing is more selective, for a shorter period. He said, however, that the situation is within parameters considered normal in other countries and should come back to normal levels for the country within two or three months. GM Brazil forecasts growth of at least 5% next year.

"There is currently senseless hysteria," pointed out Pinheiro Neto. This is a similar opinion to that of Citroí«n Brazil president Jean Louis Orphelin, for whom the crisis is more of confidence than of credit itself.

The executives of the field were also almost unanimous in applauding the measures that are being adopted by the government of Brazil in recent weeks to guarantee liquidity of banks and to calm the financial market, among them the one authorizing the Bank of Brazil to operate in the sector of vehicle financing and even to purchase financing companies that may be undergoing hardships.

At Ford the feeling is no different. According to the company's president for the Mercosur, Marcos Oliveira, the organization already has plans to release 23 models of vehicles between 2009 and 2013, among restyling of current vehicles and totally new ones. "There has already been impact of the economic crisis and this is a moment for analysis, to consider our strategy for the future. But we continue betting on the future of the Brazilian market, on the growth of the country and of South America," he said.

In the evaluation of the director, the release of the new models grants greater competitiveness to the company. This is a similar evaluation to that of other organisations. Apart from that, according to most of the executives who spoke yesterday, the Brazilian carmakers did their homework to face turbulence, reducing cost and investment in technologies to optimize production.

As is the case with GM, Ford has in Brazil its third main market, losing only to the United States and United Kingdom. "We see the crisis as an opportunity to improve our business, to seek new solutions, and have great faith in the Brazilian economy," stated the Ford vice-president for Canada, Mexico and South America, David Schoch. "We plan to continue investing and believe in the growth tendency in the country. We have a long-term vision for Brazil and South America," he added.

Toyota also guaranteed that it should keep its plans for construction of a new factory in the city of Sorocaba, in the interior of the state of São Paulo. Hyundai is another that should keep its plans, with a second model, Tucson, starting to be produced at the plant in Goiás in 2009.

With regard to homework, Renault says it has done its share. The organization has already released five of the six models forecasted for 2006 to 2009, has complied with the target of doubling the sales volume in this period and has reduced costs increasing profitability, according to the company president for Brazil, Jérôme Stoll.

Citroí«n believes in the continued growth of sales, although not at the same levels as the 67% from January to September this year. The company forecasts that participation in the Brazilian market should rise from 2.6% today to 3% in 2009.

What causes the factories to have faith is the potential of the domestic market. According to figures supplied by Fiat, in Brazil there is now one car for every eight inhabitants, whereas in Europe the proportion is one car for every two inhabitants. That is, there are 25 million vehicles for around 200 million people. To reach the European levels, the sale of another 75 million vehicles is necessary, indicating a great horizon of growth.

As is the case with other companies, Fiat guarantees that it is going to maintain its plans. The organization forecasts investment of 5 billion reais in the country from 2008 to 2010 to increase its production capacity from 700,000 vehicles to 800,000.

Honda is also eyeing the latent potential of the market. "Not depending on conjectural factors, we believe in the market potential," said the company vice president, Kazuo Nozawa. In the short term, however, he believes that sales should remain on the same level and mentions lack of credit as the main problem to be faced.

In the area of motorcycles, the Japanese factory has even stopped production at its factory in Manaus and has granted holidays to the employees, but in the vehicle sector there is no forecast for this in the factory in Sumaré, in the interior of the state of São Paulo.

Nozawa said, however, that appreciation of the dollar should have an impact on the cost of imported inputs, which may affect the company's profitability. Oscillation of exchange rates generates an additional problem: the difficulty of establishing prices. The company is releasing the new Honda Fit at the trade show. The vehicle is very popular in Brazil. As the car has around 30% of its components imported, the company has not yet disclosed the price of the new version, which should start being sold this month.

The case of the new Fit is a glimpse into the current picture for the industry. Despite optimistic perspectives in the long run, companies have avoided large forecasts in the short term. The idea is to wait for the dust to settle, or to sit and wait.

The fact is that the Brazilian market has grown much in recent years. The forecast of the National Association of Vehicle Manufacturers (Anfavea) for 2008 was for growth of 24%. Despite a slight reduction in growth in the fourth quarter, due to the crisis, the performance should remain above 20%. Last year the growth was 29%. Even without the turbulence, this high level of growth was not expected to remain for many years.

Anba - www.anba.com.br

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