Why the world’s automakers love Brazil

October 5, 2012

Joann Muller – Forbes, 10/05/2012

Here’s what the world looks like to a car guy inDetroit right now: In the U.S. new regulations are cranking up costs while cautious car buyers creep back into showrooms. China’s once-hot sales are cooling–fast. Europe is a total basket case, with too much production capacity and an allout price war. Carmakers from General Motors and Ford Motor to Volkswagen and Daimlerwarn of difficult times ahead. Market conditions, says VW Chief Executive Martin Winterkorn, have become “noticeably harder and tougher.”

But bring up Brazil and you get a smile. No, they’re not looking forward to a Rio vacation or a cheap retirement. What carmakers see when they look at Brazil is South America’s largest consumer market, a still-bustling economy–and a lot of potential customers. Forget that in the world’s fifth-largest country only 14% of the roads are paved. Incomes are rising, lifting almost 40 million more Brazilians into the middle class since 2003–and putting a vehicle purchase within their reach for the first time. “Brazil is at a critical point right now,” said Guido Vildozo, a Latin America specialist at market research firm IHS Automotive, noting that the country’s GDP has topped $10,000 per capita. “That’s a milestone. If you look back at the U.S., Europe, even Korea, you’ll see that this is when markets move to a growth stage. This is why we’re suddenly seeing all the carmakers focusing on Brazil. They want to try to capture a slice of that pie.”

Anfavea, Brazil’s auto industry trade group, forecasts sales will increase 68% from 3.4 million units in 2011 to 5.7 million by 2016, despite a massive tax burden and high borrowing costs thatdrive up car prices. (In the U.S. sales are forecast to rise 30%.) As early as 2015 Brazil could overtake Japan to become the world’s third-largest car market after China and the U.S., according to Roland Berger Strategy Consultants.

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General Motors halts production at plant in Brazil

July 25, 2012

Paulo Winterstein – The Wall Street Journal, 07/25/2012

SÃO PAULO—General Motors Co. suspended production for a day at its São José dos Campos plant in Brazil on Tuesday citing safety worries and prompting an outcry from the labor union that has been organizing protests against possible layoffs at the factory.

GM said in a statement that it suspended manufacturing to ensure the safety of the facility’s 7,500 employees. Workers at the plant walked off the job one day last week to protest expected job cuts. Tuesday’s shutdown is to be lifted Wednesday ahead of a scheduled meeting involving company, union and government officials, GM said.

“The company took into consideration strong evidence—in recent hours and days—of internal mobilizations at the plant and understands that the current moment is delicate and prefers not to expose its employees to incitement and provocations,” the auto maker said. GM said it would pay employees for the day, despite the suspension of production.

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GM union strikes at Brazil plant for 24 hours

July 17, 2012

Brad Haynes – Reuters, 07/17/2012

SAO PAULO, July 16 (Reuters) – A Brazilian union carried out a 24-hour strike at a General Motors Co factory on Monday to protest dwindling output on an assembly line where workers fear for the future of 1,500 jobs.

The Metalworkers Union of Sao Jose dos Campos said in a statement that the strike had paralyzed production at the plant, near Sao Paulo, which normally produces 750 vehicles per day. But a GM executive said many employees still came into work, allowing for production at a slower pace.

“On the first shift, which is the most productive, we had enough workers to continue above half capacity” said Luiz Moan, GM’s head of institutional relations in Brazil, in a telephone interview. He added that a third of workers on the second shift came in to work

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Brazil auto output dips in June despite sales jump

July 5, 2012

Alberto Alerigi and Brad Haynes – Reuters, 07/05/2012

SAO PAULO, July 5 (Reuters) – Automobile production in Brazil slipped in June despite a sharp jump in sales, as carmakers took advantage of tax breaks to draw down inventories but remained cautious about restarting idle production lines.

Auto output dipped 2.6 percent while sales jumped 22.9 percent in June from May, automakers association Anfavea said on Thursday.

In the first half of the year, production of new cars, trucks and buses fell more than 9 percent from a year earlier, as rising loan defaults and tighter lending choked demand in the Brazilian market that was booming just a year ago.

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Brazil car sales surge in June on tax break

July 2, 2012

Reuters, 07/02/2012

(Reuters) – Brazilian auto sales jumped to their best June ever, an industry source with access to sales data said on Monday, as tax breaks and lending incentives helped bolster a flagging car industry.

Sales of cars and light trucks advanced 24 percent in June from May to about 340,300 vehicles, according to the source, up 19 percent from a year earlier. Last month’s surge brought sales in the first half to 1.6 million vehicles, nearly even with the first half of 2011.

Daily sales volumes averaged around 17,000 vehicles in June, according to Thomson Reuters calculations, the strongest pace since November. Sales picked up from less than 13,000 per day in the first five months of the year.

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Ford sees late 2012 surge in Brazil market

June 15, 2012

Brad Haynes and Alberto Alerigi – Reuters, 06/15/2012

(Reuters) – Ford Motor Co (F.N) expects the Brazilian auto market to set a new sales record by the end of the year despite a sluggish start, as recent tax breaks and record-low interest rates jumpstart stagnant business at dealerships.

Rogerio Golfarb, Ford’s head of corporate affairs in South America, said in an interview on Thursday afternoon that the market would see “a really strong pickup in the second half of the year due to government measures.”

After sales more than doubled since 2005 amid a recent economic boom, Brazil’s car industry has struggled this year along with Latin America’s biggest economy. To spur consumer demand, Brazil’s government in recent months has cut taxes on select products, including cars, and encouraged the central bank to lower interest rates to historic lows.

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Brazil’s $1 million supercar

June 11, 2012

Viknesh Vijayenthiran - Fox News, 06/10/2012

A few years ago a design firm in Brazil started work on an ambitious new project to build from scratch an exciting new supercar capable of competing with some of Italy’s finest, both in looks and performance.

The original project was the DR7 from AmoritzGT, which at the time of its announcement looked very promising.

The DR7 has now evolved into the even more stunning DoniRosset supercar, named after the late Donino “Doni” Rosset and commissioned by his son William Denis Rosset.

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Brazil auto output slows; GM offers buyout

June 7, 2012

Reuters, 06/06/2012

SAO PAULO, June 6 (Reuters) – General Motors Co said on Wednesday it offered a buyout plan for workers at a Brazilian factory after automakers in the country scaled back output in May to the slowest in three months, idling factory lines to draw down massive inventories.

GM said it was offering voluntary buyouts at its factory in Sao Jose dos Campos as a result of intense competition in the Brazilian market, as well as rising labor and raw materials costs, according to a statement by the company.

The company added that the buyouts were a structural adjustment to maintain its current production program. A metalworkers’ union at the factory said GM was offering a buyout through June 15 without giving a target for staff cuts.

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BMW sales in Brazil slump 30% because of tax increase

April 16, 2012

Jose Sergio Osse – Businessweek, 04/15/2012

The company sold 1,888 units in Brazil in the first quarter, down from 2,137 units a year earlier, to give it a market share of 0.24 percent. Photographer: Guenter Schiffmann/Bloomberg

Bayerische Motoren Werke AG (BMW), the world’s largest luxury automaker, posted a 30 percent drop in first-quarter sales in Brazil due to a tax rise for imported cars, said Henning Dornbusch, the company’s country head.

In an effort to protect jobs and automakers with factories in Brazil, the government levied a 30 percentage-point increase in its industrial products tax on vehicles with less than 65 percent of their parts produced in the country. The tax increase took effect in January and is on top of the 35 percent import duty already charged in the South American nation.

“Car sales fell 30 percent due to the IPI raise,” Dornbusch said in an interview on April 13 in Sao Paulo. “We’ve partly compensated it by raising prices 15.9 percent in average, with BMW and dealerships absorbing the rest.”

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Mexico steps out of Brazil’s shadow

April 13, 2012

John Paul Rathbone – FT,  04/12/2012

I once asked Carlos Slim why Mexicans were so down about their country and Brazilians so euphoric about theirs. The world’s richest man, whose biggest investments span both countries, replied: “It’s simple. They are Brazilians. We are Mexicans.”

It was a perceptive comment. Many Mexicans feel depressed about their country, and the world has shared their gloom. Meanwhile, the confidence of Brazil’s boom – on show during President Dilma Rousseff’s visit to Washington this week – has gripped the popular imagination. The latest manifestation is the imminent $20bn stock market listing of BTG Pactual, the Brazilian investment bank that wants to be, of all things, a “tropical Goldman Sachs”. That alone should make one look again – especially as national moods were so different 10 years ago.

Back then, there was a lively debate over who was Latin America’s true economic leader. To many Mexicans, the answer was obvious. The country had just completed a transition to democracy. Its economy was bigger than Brazil’s. It even had a robust banking system. Brazil, meanwhile, was just emerging from a currency crisis, and investors were terrified that it was about to elect a dangerous leftwinger, Luiz Inácio Lula da Silva.

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