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Detroit Invests Heavily in Argentine Auto Sector
Area Development / February 1998

By Larry Luxner

CORDOBA, Argentina -- Lured by falling import barriers and pent-up regional demand, Detroit's Big Three automakers -- along with a number of European and Japanese manufacturers -- are flocking to Argentina in hopes of tapping into the booming Mercosur auto market.

Just outside Córdoba, Argentina's second-largest city, both Chrysler and General Motors have set up sprawling factories on the pampa flatlands. In April, Chrysler began assembling the Jeep Grand Cherokee here. The company now expects to produce 20,000 vehicles a year, 70% of them for export to neighboring Brazil. Córdoba, located 300 miles northwest of Buenos Aires, is already host to Italian carmaker Fiat and French carmaker Renault -- whose factory is just across the highway from GM's.

Under a December 1994 pact that governs the two countries' auto trade until Dec. 31, 1999 (after which a common Mercosur auto regime takes effect), finished vehicles and parts originating in either Argentina or Brazil have free access to the other's market, as long as imports are compensated for by exports to any market within or out of the customs trading zone. In addition, new vehicles must have at least 60% local content in order to qualify for duty-free trade.

Despite economic upheavals sweeping Brazil in the wake of Asia's currency crisis, automakers are unlikely to slow their expansion plans significantly. Production of autos in Córdoba province reached a record 133,198 vehicles over the first 11 months of 1997, with 1998 production expected to be similar. During November alone, Renault produced 9,091 units, followed by Fiat (8,008), GM (1,722), Chrysler (325) and Iveco (150).

"The Argentine market has had a history of very high protectionist tariffs which discouraged investment," said Charles N. Busch, president of Chrysler Argentina S.A., in a recent interview here. "Long production runs were epitomized by the Ford Falcon, but with the opening of the economy, things started changing very rapidly. In round numbers, it's projected that between 1995 and 2000 almost $5 billion will pour into Argentina's auto industry, and about $15 billion into Brazil."

Built on what was once a potato field, the gleaming new Chrysler plant covers 25,000 square meters; supervisors interviewed more than 800 people to hire the current 142 production workers. All are salaried employees, working one 7-4 daytime shift.

Meanwhile, General Motors' four-year-old, $120 million Córdoba facility produces 22,000 Silverado pickup trucks a year, 70% of them for export to Brazil; soon, its 466 workers will begin making Chevy Blazers at the 16,000-square-meter plant.

But what GM is really excited about is its new $350 million showcase factory in nearby Rosario, inaugurated in December.

"Rosario is a template for three new plants in Poland, Thailand and China. It's a new concept of lean manufacturing," says Alberto García Carmona, director of investor relations at General Motors de Argentina S.A., which began operating in 1993 after a 15-year absence. "The last plant we built was in Eisenach, Germany. We are adding some new technology; for example, the press shop is almost completely automated."

In addition, the Rosario complex includes an engine plant, a stamping plant and other basic operations. The plant -- which employs 1,600 factory workers and 350 non-manufacturing workers -- is already producing the 4-door Chevy Corsa sedan. Beginning in May 1998, workers will assemble the Corsa station wagon. Annual production should total 84,000 units in two shifts, with 60% of production destined for Brazil and other South American markets. "GM is a global company," says García, "and we're analyzing the possibility of exporting to Venezuela and Colombia as well."

Chrysler says nearly all of its factory workers have been trained at company facilities in Austria or Venezuela; many of them speak English in addition to Spanish.

"Our strategy is not to tackle the mainstream of the market," says Busch. "We're the first Jeep sport-utility vehicles being produced in the area. We feel the opportunity for growth is very strong in some key niches." The two models being produced in Cordoba are hardly cheap by Argentine standards; the Grand Cherokee Laredo sells for $44,000, and the Grand Cherokee Limited for $49,000.

"This is the first greenfield plant Chrysler has built by itself in over 20 years, the first totally new building and workforce," says plant manager Joseph J. Ozdowy. "This is a testbed to implement new ideas, managed from the bottom up. There's only one salary classification for this whole plant, and the union has been 100% cooperative."

Likewise, all the workers at GM's Córdoba facility -- originally a Renault warehouse -- don the same blue sweaters, regardless of rank. The employees' average age is 23, and one in five are taking English classes. "There's no time clock here," says a GM spokesman. "It's a matter of trust."

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