| | |  Business News | November 2008 
Latin America's Car-Buying Boom Ends as Crisis Bites
 Agence France-Presse
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| | Thousands of Citroen cars wait at the Rio de Janeiro port in Brazil. (Agence France-Presse) | | |
Sao Paulo — Latin America's huge appetite for new cars is slowing under the effects of the global financial crisis, denting the hopes of big automotive groups that had been banking on the region's resilience.
The sector's downturn is most pronounced in Brazil, the biggest auto market in Latin America, and one of its biggest manufacturing bases for vehicles along with Mexico and Argentina.
Troubled US automakers Ford and General Motors have factories in Brazil serving the region, as does Germany's Volkswagen and Italy's Fiat.
The most-affected Brazilian states of Sao Paulo and Minas Gerais this week said they were extending a two billion dollars credit line to the industry, adding to the 1.8 billion dollars the federal government said last week it would stump up.
"It is necessary for authorities to take initiatives like this" to keep Brazil's economy ticking over, Finance Minister Guido Mantega told reporters Tuesday.
The auto industry accounts for about five percent of Brazil's gross domestic product.
The sudden evaporation of consumer optimism, coupled with more restrictive lending by financial institutions struggling with the worldwide credit drought, have torpedoed Brazilian new car sales.
Anfavea, the national automakers' association, said last week Brazilian-made and imported car sales for October dropped 11 percent compared to the same month last year - the first decline after nine years of record growth.
Consumers are being hit by reduced time periods for loan repayments, higher interest rates and higher upfront deposits.
There were hopes the credit lines would spur Brazilian sales, though that was far from certain.
The Folha de Sao Paulo newspaper reported anecdotal evidence that the number of people trying to sell newly bought cars to clear some of their debt was on the rise.
"This is the first time I've seen a situation like this," it quoted one used car dealer, Victor Marrese, saying. Marrese said around 10 clients a day were walking into his shop looking to trade down their over-leveraged vehicles.
Car companies, fearing unsold inventory, have put thousands of workers on leave to slow production.
Fiat - which makes all its profits from Brazil - said Wednesday it was ordering 3,000 employees at one factory on a 10-day break.
Another 15,000 workers are already idling after decisions by General Motors, Honda and Volkswagen.
In addition, South Korea's Kia Motors has frozen plans to build its first factory in Brazil because of the turbulence.
Other Latin American nations important to the industry are suffering, too.
Mexican auto sales fell 14 percent in October compared to the same month in 2007. So far this year, the market has contracted 3.4 percent.
"This continued drop is the effect of a lower consumer confidence index created by the international financial turbulence, which has forced consumers to postpone decisions on buying new vehicles," the Mexican Automobile Industry Association (AMIA) said in its weekly report.
The only bright spot was exports, AMIA said, reporting a 16-percent increase in the number of Mexican-made cars being sent abroad, mostly to the United States.
But with US auto sales collapsing - leaving auto giants General Motors and Ford in a perilous state - it was doubtful that phenomenon would last.
In Argentina, thousands of automobile industry workers on Monday marched to protest plant suspensions by Renault, Peugeot, Volkswagen, Mercedes-Benz and General Motors, as well as threatened lay-offs.
The national sector, which had been powering along right up to a record year for production in 2007, has locked up its brakes under the crisis.
The national mechanics' union said 10,000 workers were affected as all-important exports to Brazil, Mexico and Europe suffered.
"Sales to Brazil and Mexico, our principal external markets, have almost completely shut down, and for us exports are 27 percent of sales," a Renault executive speaking on condition of anonymity said. |
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