There are no signs of relief as yet in the
hard pressed Argentinean car industry. Output in July was a savage 44.2% down on last year
at 19,467 from 34,890. That was only marginally better than the YTD deficit of 49.5%, at
106,047 from 210,092. Output had risen steadily and with conviction to the 366,466 of
1997, and 1998 had started off as if 400,000 would not only be beaten, it would be left in
the rear view mirror. But then came October and the shock waves from the Far Eastern
crisis pounded on the shores of South America and Argentina went into savage decline. From
a peak annualised build rate of nearly 385,000 in August 1998, the sector has now slipped
drastically to a rate of 249,000 as at the end of July and at the current rate the sector
will be lucky to see 210,000 cars built for full-year 1999.

The current downturn has set the industry
back eight years. Worse still, it has come at a time of considerable investment for
expansion with most of the established contenders in the sector. Worst affected has been
Fiat, and they can afford it least. Fiat has seen output crash by 57.4% to 23,878 from
56,090, a drop of 32,212 units, and that throws a huge question mark over the potential of
the new Palio range. Fiat’s world car is vital to its development outside of Europe
and the car and its derivatives have been specifically developed for emerging markets. As
the main competition in Argentina do not have such specific models, the dreadful state of
the sector at the present time could be seen to be the perfect opportunity for Fiat to
demonstrate that their world car policy is sound. So far it hasn’t panned out that
way.

Others have suffered bigger percentage
losses, but in pure unit terms it is Fiat that have sunk the furthest. Fiat built 162,249
cars in Argentina in 1994, but then began to completely restructure after the collapse of
Sevel. A new plant was established at Cordoba with installed capacity of 120,000 pa, and
Fiat began the long climb back from the trough of 55,882 in 1996, reaching 87,004 in
full-year 1998. Now they look as if they will do well to match the 1996 result. Yet Fiat
doesn’t just want to build 120,000 a year. Capacity was actually being laid down to
lift the figure to around 215,000 pa, which would catapult Fiat into the position of
Argentina’s top car manufacturer, ahead of Renault. All of that is now on the back
burner, and will stay there simmering for some time yet.

Fiat aren’t the only ones with big
plans for Argentina. Peugeot was in the process of lifting output to 85,000 cars and
15,000 light trucks a year when the downturn struck. Peugeot has recently added the new
206 and the Citroën Picasso at their new plant at Porto Real, so the current situation
means that any return on the recent investments will be put off for a least a year. Ford
has already slowed its investment programme and has been forced to build trucks that it
would rather have left off the production lines. Ford has committed $1 billion to
developing its facilities and range in Argentina, and the programme should have been
completed by early next year, but now it seems as if 2002 will be the more likely date.