BRAZIL: Deloitte suggests dealer restructuring
Ivar Berntz, associate leader of Deloitte in Brazil for the auto sector, suggests lessons learned in the US during the 2008-2010 financial crisis may also be applied in Brazil. This was one of the issues under discussion during the Planning 2016 workshop in São Paulo promoted by Automotive Business, a communications firm specialising in the sector.
"In the US, the conclusion was the dealer network was 50% larger than necessary that moment. There was much suffering, shop closures and many accords with automakers. It took time, but working together proved to be the right move," he said.
In the current, troubled Brazilian market this phenomenon is fully under way. National dealer association Fenabrave, which has over 8,000 members, of these more than 5,000 handle 'heavy light and heavy vehicles', said up to last month 691 dealers had shut down and 344 new shops started operation (some networks are expanding, like Jeep's). But the balance was a loss of 347.
Deloitte's global associate leader Joe Vitale, also the workshop moderator, was brief: "One cannot ignore a good crisis." In the US, the Lehman Brothers meltdown worsened problems that were far from new, but ignored.
"Among other factors, it was perceived that production would never exceed demand and the consumer would not be hit with the reduced burdened volumes' additional cost," he added.
He noted Brazil undergoes up and down cycles at an abnormal pace but the importance of its domestic market for global brands justifies their presence here. "It is sufficient to note the high growth between 2005 and 2012. A crisis and how to exit from it is naturally more painful in this context," he said.
Vitale said, as in the US, investments cannot be simply overlooked. Companies that invested more in innovation and suitable products for the Brazilian market were those that came out of the crisis in better shape. He noted the American government provided support to the recovery in order to avoid a catastrophe in the auto sector that would have spread throughout the economy.