Ward's Automotive International / November 1, 1995
By Larry Luxner
BUENOS AIRES -- Despite economic stagnation that has pushed Argentina's unemployment rate to 20% and made life difficult for most of the country's 32 million inhabitants, Detroit's Big Three automakers are all flocking to Argentina in hopes of tapping into Mercosur, a four-nation customs and trade union linking Argentina, Brazil, Paraguay and Uruguay.
Industry experts say automobile production in Argentina has skyrocketed since the beginning of its economic stabilization program in 1990, from 91,000 vehicles produced in 1991 to 380,000 in 1994 and a projected 410,000 vehicles in 1995.
In mid-September, Chrysler Corp. announced it would invest $100 million to build its own auto assembly factory somewhere in Argentina rather than pursue a working relationship with Iveco Argentina S.A., as announced last February.
Jonathan B. Holcomb, vice-president of Chrysler’s Latin American operations, said at a Washington press conference that his company plans to produce 4,000 to 6,000 Jeep Grand Cherokees annually, though overall plant capacity would be 20,000 vehicles a year.
“Our analysis is that the long-term economic outlook for Argentina and the Mercosur region continues to be very positive,” Holcomb said. “We recognize that Mercosur is one of the largest common markets in the world, and Chrysler wants to be properly positioned to meet market demands in the future.”
Chrysler spokesman Jack Macauley said the new factory will employ 350 workers, but he couldn't say where the plant will be located, since the company is considering a number of locations including Buenos Aires and Córdoba, a city 300 miles northwest of the capital. A site decision is expected by year's end.
"Our vehicle production is not just for Argentina," Macauley said. "These Jeeps will be going to the other three countries in Mercosur -- Brazil, Paraguay and Uruguay. Many different options have been considered," he added, "though this doesn't discount the possibility that something would be built in Brazil in the future."
Earlier this year, the Menem government granted Chrysler Argentina S.A. terminal manufacturer status to establish an auto plant, following which Chrysler established executive offices in Buenos Aires. Chrysler and Iveco had planned to assemble Jeeps at Iveco’s existing facility in Córdoba, but jointly concluded that a joint operation wasn’t feasible “due to changes in future product plans and differences in vehicle size.”
Ford announced earlier this year it would invest $1 billion in its 35-year-old plant in Pacheco, near Buenos Aires, to be spent as follows: $136 million on modernization, $147 million on "expanding productive capacity" and $717 million on new products. The factory will keep its current workforce of 5,000 and will begin manufacturing such models as the Ford Ranger pickup, the Orion and the Escort by early 1997. Ford will keep about two-thirds of the 154-hectare complex which had been owned by Autolatina, a joint venture between Ford and Volkswagen that began to separate in December 1994 and for all intents and purposes is no longer in existence.
Meanwhile, General Motors executives have dedicated the future site of an 860,000-square-foot vehicle assembly and component factory in Santa Fe province.
Basil Drossos, the new chief of GM de Argentina, said the $300 million complex will employ 1,400 people once production begins in late 1997, with construction set to start later this year. Specific vehicles to be assembled at the plant weren't disclosed for competitive reasons.
In 1993, GM resumed vehicle operations in Argentina after a 15-year absence, with a small assembly plant in Córdoba that produces C-20 and D-20 Chevy pickup trucks. Drossos, who was named president and managing director of GM's Argentina operations on Aug. 1, said GM's decision to locate the plant in Santa Fe followed a study of more than 20 prospective plant sites throughout Argentina.
"We have a very small percentage of the market, since we're only producing since last September," said Alberto Garcia, GM's manager of institutional relations in Buenos Aires. "However, the general conditions in Argentina are good for investment."
Throughout Latin America, GM says it sold 245,700 vehicles during the first half of 1995 -- 20.1% more than the 204,500 vehicles sold during the first six months of 1994, establishing an all-time Latin record in the process. Overall, the regional vehicle market has jumped 120%, from 1.2 million units in 1990 to 2.6 million in 1994.
Richard C. Nerod, GM's vice-president for Latin American operations, says that "GM's strong distribution footprint, coupled with expansion programs in Brazil and Argentina, should position GM to maintain a leadership position within the industry."