GM urges Latin America to honor trade pacts

CARTAGENA, Colombia Fri Apr 13, 2012 8:32pm IST

A General Motors logo is seen on a vehicle for sale at the GM dealership in Carlsbad, California January 4, 2012. REUTERS/Mike Blake

A General Motors logo is seen on a vehicle for sale at the GM dealership in Carlsbad, California January 4, 2012.

Credit: Reuters/Mike Blake

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CARTAGENA, Colombia (Reuters) - General Motors (GM.N) will press Latin American governments to respect existing trade agreements despite a protectionist trend round the region that the U.S. automaker fears could complicate manufacturers' investment plans, a senior executive said.

Brazil has taken steps of late to slow auto imports from Mexico -- and Argentina says it may do the same -- in an effort to bolster flagging industries and prevent layoffs as strong currencies boost production costs and consumer credit slows.

"They are renegotiating trade accords that have been in place several years and they are renegotiating without giving companies a reasonable time to adapt," GM's president for South America, Jaime Ardila, told Reuters.

"We had investment plans in Mexico, in Brazil and in Argentina too, based on those deals. If they change because of this protectionist situation, that affects us, " he added in Cartagena, Colombia, ahead of this weekend's Americas Summit.

"This tendency worries us a bit," he added.

GM is the world's largest automaker by sales volume.

Mexico in March yielded to pressure from Brazil to slash auto sales to the South American giant, fixing an export quota for the next three years to save a decade-old trade agreement between Latin America's two leading economies.

Analysts said the tough line taken by Brazil showed how it has become more assertive thanks to a sustained period of growth in recent years that has pulled the country into the front rank of global economies.

GM holds about 19 percent of the Latin American auto market, selling 1.1 million units out of a total 5.7 million region-wide, Ardila said in the interview conducted late on Thursday.

CHANGING RULES?

This weekend's summit will draw government leaders from across North and South America.

The gathering may give GM the chance to lobby major regional players like Brazil and Argentina, and argue that changing contracts negotiated years prior could hobble long-term investment plans for some manufacturers.

"We don't like them changing the rules of play every so often, without warning and without giving us a transition period," said Ardila, who is based in Sao Paulo. "Still, that hasn't changed our commitment, which is long term."

The automaker's investment plans in Latin America this year remain unchanged at $1.3 billion, Ardila said, without providing details on next year's spending.

Among investments lined up for this year, GM plans to launch nine new models in Brazil and Argentina, and another five in the rest of Latin America.

There are also plans to expand production at its Rio Grande do Sul plant, its biggest in South America, in Brazil near the border with Uruguay. General Motors will create 2,000 new jobs by expanding output to 350,000 units a year from 220,000 now.

The automaker, which produces Chevrolet cars in Latin America, also has a $200 million investment plan underway in Colombia and may spend $50 million in Argentina to create 600 new jobs at its plant in Rosario, Ardila said.

The auto industry in Latin America has suffered in recent months from a loss of competitiveness, Ardila said, as production and labor costs increase in line with strengthening regional currencies.

After growing at rates of about 10 percent annually, industry-wide car sales in South America have suffered from slowing bank lending this year, Ardila said. In the first three months, some 1.35 million vehicles were sold, similar to the same period in 2011.

"The credit situation changed. Banks seem to be worried about indebtedness. It's a period of transition, not a long one, but this year there won't be growth."

He expects vehicle sales in the region to pick up again next year after a pause in growth this year versus 2011.

"Latin America is the second biggest market for Chevrolet," Ardila said. "The first is the United States, and the second China."

GM's aggressive product rollout in South America is due to a lack of investment in the region during the company's 2009 bankruptcy reorganization.

The lack of new vehicles resulted in a $225 million fourth-quarter loss and led Chief Executive Dan Akerson to name South America, along with Europe, as regions where the U.S. automaker is tackling problems.

Last fall, he called results in South America not acceptable and vowed more cuts in Brazil after GM had previously eliminated 4 percent of the company's jobs there.

(Editing by Brian Ellsworth, Andrew Cawthorne and W Simon)

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