Ford sees Brazil overcapacity pinching margins

DETROIT Thu Nov 15, 2012 4:56am IST

The Ford Motor Company Inc. logo is seen on a wall at the New York International Auto Show in New York City, April 20, 2011. REUTERS/Mike Segar

The Ford Motor Company Inc. logo is seen on a wall at the New York International Auto Show in New York City, April 20, 2011.

Credit: Reuters/Mike Segar

Stocks

   

DETROIT (Reuters) - Automotive production capacity in Brazil is expected to outpace demand until 2016, a trend that will pinch margins on small cars - the country's largest vehicle segment - a Ford Motor Co (F.N) top executive said on Wednesday.

"Excess capacity is going to put more pressure on pricing and margins, particularly in the B segment, or small car segment, which is the largest segment in Brazil," Mark Fields, Ford's head of the Americas, said during an investor conference.

This year, Brazil's auto sales are expected to be around 3.8 million cars. But capacity is more than 20 percent higher at 4.7 million vehicles. The gap between demand and installed capacity is expected to grow every year until 2016.

Ford will production in the region to expand its vehicle offerings in Brazil, but Fields said the increase would not be significant.

"We plan on accomplishing this within the same manufacturing footprint," he said. "We do expect to participate in the growth in the region, without adding significant capacity."

From 2008 to 2011, the top four automakers in Brazil, including Fiat SpA and Ford, have lost market share despite a nearly 30 percent jump in sales. Meanwhile, companies like Renault (RENA.PA) and Hyundai Motor Co (005380.KS) have gained.

Newer entrants have started building factories in Brazil in response to steep tax incentives and high penalties for imported vehicles. Last month, Kia Motors Corp (000270.KS), hurt by a tax hike on foreign-made cars of 30 percentage points, said it would study building a factory in Brazil

"While the industry volumes are growing in Brazil, which is fantastic, capacity is growing at a faster rate," Fields said.

The second-largest U.S. automaker holds 9.5 percent market share in Brazil. Ford has four factories there, two assembly plants, an engine plant and a transmission plant.

Ford builds its Fiesta subcompact and EcoSport small crossover, two vehicles built on the automaker's global small car platform, at its Camacari Plant. The company also makes the Ford Ka car, Ford Courier pickup truck and cargo trucks at its Sao Bernardo Assembly Plant.

(Reporting by Deepa Seetharaman; Editing by Dan Grebler)

  • Most Popular
  • Most Shared

Pending Reform

REUTERS SHOWCASE

Power Theft

Power Theft

India to invest $4 billion to tackle power theft  Full Article 

Debt Funds

Debt Funds

India monitors foreign flows into debt funds, may tighten rules  Full Article 

Bulgari Back in India

Bulgari Back in India

CEO: we shouldn’t have left India so we’re back  Full Article 

 Hindu "Modi-fication"

Hindu "Modi-fication"

Fears grow about Hindu "Modi-fication" of education  Full Article 

Weak Credit

Weak Credit

Hard to hit tax revenue target, credit weak - Jaitley  Full Article 

China Rate Cut

China Rate Cut

China surprises with interest rate cut to spur growth  Full Article 

Gold Imports

Gold Imports

RBI cautious on response to gold import surge  Full Article 

Economic Corridor

Economic Corridor

China commits $45.6 billion for economic corridor with Pakistan  Full Article 

Overseas Funds

Overseas Funds

RBI says overseas borrowed funds can be parked with banks in India  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage