LABOUR-ARGENTINA: Automotive Sector a Dead-End Street

By Marcela Valente Reprint | | Print |

Marcela Valente

BUENOS AIRES, Mar 1 2001 (IPS) - The number of jobs in Argentina’s automotive industry has plummeted 50 percent since 1998. The outlook for this year is just as gloomy, as this sector – which led the country’s economic growth in the 1990s – has yet to hit bottom.

The combination of factors leading to this point is explosive: the internal market retracted, the State halted production subsidies and the external market grew increasingly out of reach in this highly competitive industry that, in relative terms, has high costs due to the over-valuation of the Argentine peso, which is kept at par with the US dollar.

“It is as if for the lack of a dam we were trying to stop the flood with our hands,” Carlos Teiler, a leader of the Mechanical Workers’ Syndicate of Argentina, told IPS during a day at his office in which the telephone never tired of relaying bad news.

“From the total 23,140 jobs we had in 1998 (including auto and parts manufacturers), we fell to 10,964 in January of this year,” Teiler said.

Delfa & Packard, an auto parts manufacturer that employed 800 people, simply closed up shop. The General Motors factory in the central province of Córdoba also shut down, costing 387 workers their jobs, he reported.

In addition, said the union leader, the Ford factory in Pacheco, a town in Buenos Aires province, reduced its personnel from 4,120 to 1,956, Volkswagen cut its staff from 3,245 to 1,340, Fiat from 3,300 to 888, and Renault from 3,800 to 1,300.

“And I’m not counting those who have been suspended,” he pointed out.

He was referring to the hundreds of workers in the industry who receive their wages without going to work – a stopgap measure as everyone awaits a resolution to the situation. But, given the unfolding of the nation’s economic crisis, the outcome does not look promising.

The salary automotive workers receive for staying at home is less than what is established by agreements between the unions and the corporations, but it serves to postpone full layoffs.

In one case, “we spent 15 months negotiating so that the company would not leave people in the streets. At first, those who were suspended were paid 800 dollars a month, then 700, then 600, and at the end of the period, because the situation didn’t turn around, they ended up firing them,” said Teiler.

The unionist went on to tell of the dozens of small and medium- sized auto parts factories, with 40 to 70 employees each, that have closed their doors because they are producing unneeded inputs for car manufacturers that are quickly disappearing.

The Argentine industry had until 1998 achieved an annual production of nearly half a million vehicles, boosted by government incentives – largely through tax reductions – and an internal market that was still growing.

That level of production reflected a jump from the 90,000 vehicles produced annually at the beginning of the decade. But since that peak, output has remained in decline. Last year, Argentina manufactured 340,000 cars and, of course, even fewer are projected for this year.

The best scenario would be if the factories were to produce 335,000 vehicles in 2001, but that would require conditions that do not currently exist, said José Luis Reily, public relations adviser for the Automotive Manufacturers Association of Argentina.

In the first place, unions, manufacturers, concession-holders and consumers agree that taxes must come down.

“A car that leaves an Argentine factory at 10,000 dollars, with all the taxes included, is sold by the dealer for 14,700 cash,” he explained. If the buyer needs to finance the purchase, the price rises further.

The tax burden is 47 percent for the least expensive automobiles sold in Argentina and 52 percent for those with price tags surpassing 22,000 dollars. “In Italy, car prices rise 23 percent when taxes are added in – half the rate here,” he pointed out.

The centre-leftist Fernando de la Rúa was sworn in as Argentina’s president 14 months ago and has so far been unable to reverse a recession that has lasted twice that long.

With the concession of a 40-billion-dollar “credit shield” from the International Monetary Fund (IMF), many car dealers attempted to boost sales, taking out advertisements promoting “shielded” financing plans for car purchases, trying to capitalise on the confidence boost based on the foreign aid.

But the positive impact of the announcement of overseas financial assistance is weakening without having reactivated consumption.

The message from the Secretariat of Industry to the automotive corporations is clear: don’t expect help from the State. If the domestic market remains depressed, they must seek channels in order to export the cars.

Manufacturers “must realise that the possibilities for help from the government have run out and that it is not official policy to promote development through high-cost industry-specific incentives like those the automotive industry enjoyed until now,” stated Javier Tizado, secretary of Industry.

Tizado expects the carmakers to make greater efforts to sell to Brazil, their principal foreign market, and to the rest of the world.

“We believe exports would allow the creation of a critical mass that would help cushion some of the high fixed costs that correspond to an established capacity for producing much more,” the industry official explained.

With its current infrastructure, Argentina could put out more than 800,000 vehicles a year, but, in order to expand into the foreign market, the costs must come down further – and there is no longer any margin for absorbing the decline, agree manufacturers and unionists.

Teiler explained that the proportion of labour costs in the price of a car fell from 25 percent in the 1970s to seven percent today. “We gave up a great number of rights, we became ‘flexible,’ we agreed to everything, but the factories are closing anyway,” he said.

In Brazil, the union leader calculated that with the devaluation of its currency, the ‘real,’ that began in 1998, an automotive worker earns the equivalent of 500 dollars a month. In Argentina, the wage used to be twice that.

Then the compensated exchange regime that is in force between Argentina and Brazil imposes a ceiling that is very close to export potential, he explained.

The president of the Association of Automotive Factories, Cristian Rattazzi, reports that production costs in Brazil average 25 percent less than in Argentina. As a result, many of the companies closing up shop in Argentina are reopening across the border in Brazil.

According to compensated exchange, an agreement signed within the framework of the Southern Common Market (Mercosur, made up of Argentina, Brazil, Paraguay and Uruguay), vehicle export levels must be kept equivalent with vehicle imports within the bloc.

If Argentina would attempt to produce more for the Brazilian market, says the accord, it would imply more Brazilian cars competing on Argentina’s internal market.

In third markets, outside the scope of Mercosur, the conditions are not much simpler. Most industrialised countries protect their auto manufacturing sectors, and in developing countries, where wages are even lower, Argentine-made cars would have a difficult time competing.

Given the current context, the union predicts protest movements will begin in coming weeks with the objective of “awakening the government from the autism in which it is submerged,” says Teiler.

But in the meantime, the laid-off workers are desperately seeking some alternative.

Rafael Gómez, who worked for Fiat until a year ago, has been hoping to find work in some car bodywork shop, but has so far been unsuccessful.

Others like him are working on their own, plying the trades they learned in the industry, but no one has the stability of working for a corporation that can offer a job contract.

“The situation is so critical that in this country the only syndicate that is growing is that of private guards. At least some of our workers can get by making bars for windows and doors to protect homes from the impacts of expanding poverty,” stated a sadly ironic Teiler.