GM Eyes Argentina For Growth; Considers New Small Car Production

[Ming]

Car makers eye Argentina to ride Latin American growth
By Serena Saitto
5/23/2007
Market Watch

General Motors will decide next month if Argentina will produce a new small car. GM is also considering Mexico and Brazil for the vehicle. If Argentina is selected, GM will pump $250 million into operations there with the ability to build 110,000 versions of the vehicles annually.

Volkswagen and GM are the latest in a string of auto makers eyeing Argentina as a lower-cost manufacturing base that can help fuel attempts to tap emerging markets as more established markets in North America and Western Europe stagnate.

Argentina's light-vehicle industry posted a 15% sales volume increase in 2006, while production grew 35% to 432,000 units and is poised to surpass 500,000 units this year.

The robust car industry is one of the key factors, together with the agricultural and construction sectors, driving Argentina's economic recovery and prospects for further growth, economists say.

Argentina has recorded a more-than 8% annual economic growth rate over the past four years, driven mainly by a weak currency and strong demand for new cars from the domestic market and from Brazil, which, as the largest market in Latin America region, is the biggest buyer of Argentine vehicle exports.

Argentina, as a member of Latin America's Mercosur trading bloc, is free from custom duties in its trading with Mercosur members, including Brazil. According to Argentina auto makers association, Adefa, more than 50% of Argentina's car exports go to Brazil.

Argentina has capacity to produce 800,000 cars a year, but on average only 60% of that capacity is utilized. Brazil, by contrast, has a 75% utilization rate of its 3.5 million annual capacity. At more than 1.8 million vehicles in annual sales, Brazil's market is four times the size of Argentina's, according to trade publication Ward's Auto Reports.

"Many auto makers have the situation where they don't have capacity in Brazil, but they do have capacity in Argentina," CSM Worldwide auto analyst Juliano Alquati said. He said many auto makers may be interested in building cars for Brazil in Argentina as a way to hedge against the more highly-valued Brazilian real. One real buys 1.58 pesos.

"Strategic decisions in Argentina are taken in tandem with Brazil," GM Argentina President Felipe Rovers said in an interview. He noted GM will finalize its decision on where to build a new vehicle for the Latin America region next month. The decision could prove to be an important one for GM, which earned $500 million last year in the Latin America, Africa and the Middle East -- most of which came from Latin America.

Full Article: http://www.marketwatch.com/news/stor...CEC1D6F105A%7D

CHEVROLET ARGENTINA

[Stéphane Dumas]

It's interesting to follow that. Argentina got once a big economic potential and got even a growth similar to USA from 1890 until the great depression of 1929 arrived, and after WWII until recently, the economy got lots of ups and more downs with the militairy.

Besides VW and GM, Fiat, Ford, Renault and PSA I think have some plants in Argentina as well. Chrysler had once a big presence in Argentina before they sold their Argentinian operations to VW in the late 1970s-early 1980s http://www.allpar.com/world/argentina.html (and here a Spanish site with lots of pictures of these Mopar from La Pampa http://www.argentochrysler.com.ar/ )

[SmallBlock]

Argentina is one of those countries where if you see it during its "boom" upswing, you wonder, why doesn't anyone source or build down here? Of course, talking with any Argentine will quickly enlighten you.

The economy there has been described as not a "boom and bust" cycle, but more of a "cyclone". Prior to 2001, the Argentine peso was pegged 1to1 to the US dollar, which made Buenos Aires one the most expensive cities in the world. Of course, you can't export much when you're looking at massively overboosted currency. Economic malaise developed, as whole sectors of the economy (manufacturing, agriculture) struggled with their products being vastly over-priced on the global markets.

Eventually, the government couldn't hold the dollar to peso peg anymore, and in 2001, they let it float. Overnight, everything went from 1 to 1 to 1 to 2, to 1 to 3. People thought it was going to be go as high as 1 to 10. It settled at about 1 to 3.

How would you like it if you woke up one day and 2/3rds of your purchasing power was just destroyed. You now make 33% of what you once did.

That's Argentina.

Now, with everything devalued, the manufacturing and agricultural bases are taking off, globally competitive, and ideally located by Brazil.

But....everyone there is just waiting for the next collapse. Everything they plan for down there hedges against the next collapse. It isn't an "if" scenario. To them it's a "when".

In my opinion they create a self fulfilling prophecy.

1) The economy takes off, creating demand.
2) The demand requires new capacity, but nobody wants to invest for fear of the next collapse.
3) Without new capacity, inflation spikes.
4) Inflation reduces peoples purchasing power, leading to...
5) Economic collapse.

Repeat ad nauseum...

[superstreet]

most of the cars that are sold in argentina also are sold in mexico and i see it very often here and look very good

[CobaltSScrazy]

if they can tap the capacity and build a small car there profitably I'm all for it! I hope things shake out well as I'd like to see GM 'tap' a new car market and sell profitable vehicles and increase marketshare globally instead of just US/China/Europe wise b/c most of japan's big 3's profits come from the US so if we can make most of our profits elsewhere and get some kind of kickback from the motherland, how cool would that be? I hope in 5 years things are different and people finally get over the perception garbage that persists today. Hell I'd be PROUD to have my Mom in a 2010 Malibu to replace her 04 Malibu Maxx...it should be just as good or World Class and I would be able to say that I'm proud to drive a Chevrolet...

CobaltSScrazy

[samkung]

Dont like the Chevy badge they used in SA, they should use a real chevy badge instead of this opel/chevy hybrid

[redimpss5]

Well, if they need cars..Let's give them cars!

[nadepalma]

Originally Posted by samkung

Dont like the Chevy badge they used in SA, they should use a real chevy badge instead of this opel/chevy hybrid

I agree with that -- I think that they need to just use one badge (the Gold badge that is adorning all the cars around the rest of the world) as the sole badge. No more mixing.