BRAZIL: The rally for investments has started

By just-auto.com editorial team | 21 December 2007

A market that jumps 30% after growing at an average 10% for three consecutive years can do nothing but to draw attention.

Excess capacity, once way above the world average, is now gone almost completely and some would-be car buyers are now on waiting lists. This is the current scenario in Brazil, where 2.5m units will have been sold by year end.

The clear consequence: a procession of top brass landing here one after another, eager to invest.

Some more than others.

GM's Richard Wagoner in July kicked off the spending spree, announcing $500m for new products immediately and hinting at another $500m before too long. The company has made investments in processes but does not plan facility enlargement, for the time being.

The executive responsible for Latin America, Maureen Kempston-Darkes, was back last month and said GM is ready to keep up with market growth. "In productivity alone we have gained the equivalent of a new, 180,000-units plant and are working two shifts only", she noted.

The man more eager to 'open the wallet' was Fiat's CEO Sergio Marchione. Late last month he ordered the Brazilian subsidiary to spend up to $2.5bn by 2010. C Belini, the senior Brazilian executive, forecast that the brand may end up producing 1m units a year by then, if all goes well with the economy. The Betim, State of Minas Gerais, facility could end up as the largest car plant on one site worldwide and might build something like 4,000 vehicles per day, comparable only to VW's Wolfsburg at its peak.

"I'll learn to speak Portuguese if this goal is accomplished", promised Marchione.

PSA Peugeot Citro├źn chief Christian Streiff personally confirmed that his Mercosur facilities may build 500,000 vehicles yearly, split 50-50 for each country. On the other hand, Martin Winterkorn, the VW boss, did not come to Brazil but gave subsidiary CEO Thomas Schmall the green light to invest $1.8bn by 2011(30% more).

Of this total, 20% is fresh money from the parent company. Of the German brand's three manufacturing plants for automobiles and light commercials here, two have been working three shifts. In early 2008 the announcement of a 20% facility expansion it is likely to be made.

On 18 December Renault Nissan's Carlos Ghosn - he also visited Colombia - came to confirm previously announced plans for Brazil. But only the Renault side of the Alliance will have a sound South American balance sheet for 2007. "Brazil is the only country in the world where Nissan is losing money, and that is going to change", said Ghosn. He anticipated that the Japanese brand will make a high-volume model - likely a compact - by the end of 2009.

He also hinted at the possibility, if feasibility is confirmed, of producing the ultra low cost car (still on the drawing board) of Indian partner Bajaj in Brazil.

"The price obviously would be above $3,000 here, due to tax and technical requirements, and in other emerging markets," he said.

The final figure for all car maker and supplier investments is estimated at $10bn by 2011.

Fernando Calmon