Car-makers see the Latin potential but fear logistics blackout
20 May 2009. SAO PAULO, BRAZIL
Brazil’s poor infrastructure could lead to a logistics blackout, and car makers as well as service providers need to work more closely together to get government action.
While this week's Automotive Logistics South America conference in Sao Paulo left little doubt that Brazil's automotive market has been one of the best performing in the world during the global recession, delegates issued strong warnings about the future. When sales and production take off again in earnest, the country's poor roads, congested ports and non-existent rail infrastructure could block growth.
Mauricelio Gomes Faria, Fiat's Logistics Director in Latin America, said that two years ago Brazil's soaring cars sales almost overstretched the logistics infrastructure. Jose Ricardo Chiarello, head of Volkswagen's logistics in Brazil, said that while the government had its Programa de Aceleracao do Crescimento Brasileiro (PAC), "we haven't seen much movement on projects so far".
"Brazil has a potential to make a big leap [in business], but the problems in infrastructure need to be resolved first," added Stephan Gruener, managing director of logistics service provider BMS.
The major automakers were meeting at the first Summit on automotive logistics to be held in South America. They were joined by some of the principal logistics service providers in a unique gathering to focus on this vital but often over-looked aspect of the global automotive industry.
Johnny Saldanha, vice president for global purchasing for GM’s Latin America, Africa and Middle East regions, set the scene by noting that the Brazilian government's tax incentive had worked well and stimulated new car sales in the first quarter of 2009.
General Motors concurred with Brazil’s car manufacturers association, Anfavea, that the country’s sales will reach 2.7m this year provided the tax incentive remained. That makes Brazil one of the few places that could keep sales at a similar level to the "extraordinary" 2008, added Saldanha.
In other vehicle segments, the signs are also robust. Davi Lunardi, Supply Chain Direct at truck and bus maker Iveco Latin America, said that Brazil's domestic truck sales should remain around 100,000 vehicles this year. Lunardi's worry is exports, which could be only 10,000-20,000 vehicles as a result of tumbling sales in Argentina and virtually zero imports by Venezuela because of government controls.
But fixing logistics remains the underlying key to the future of the whole automotive sector in the region. Roberto Avelli, who manages the supply chain for Renault Mercosur, pointed out how Renault worked with other sectors from food to maritime to push through reforms and ease congestion at the southern port of Paranagua.
Karin Schoener from Panalpina said that private companies in the pharmaceutical industry had successfully lobbied the Brazilian government to resolve logistics safety issues. And Jansen Esteves, component maker Delphi’s manager for South America foreign trade & logistics, said that a combined message from associations such as the Brazilian Association of Autoparts Manufacturers (Sindipecas) was better than individual actions. He urged the private sector to work more with the government.
A glimpse of a possible future was given to delegates from neighbouring Argentina. Roberto Murchison, chief executive of car port Terminal Zarate, said that Argentina also faced traffic congestion outside of the ports but had managed to avoid fears of a blackout to date. Port privatisation in the mid-1990s may have avoided some of the inefficiencies of its neighbours, he said.
Summing up the mood of the conference for the 120 delegates, Volkswagen's Chiarello stressed the importance of logistics for the automotive industry. People often only think of logistics when there's a problem such as a delay of parts, he said. "But they forget, the business is only alive because of logistics."
Automotive Logistics South America conference was supported by Gold sponsor Panalpina, Global sponsor Wallenius Wilhelmsen, and Silver sponsors BMS Logistica, Hamburg Sud, Penske, Solnet and Terminal Zarate. Full conference report at: www.automotivelogisticssouthamerica.com
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Automotive Logistics South America is one of a series of conferences dedicated to the subject held annually in Europe, North America, Russia, India, China and now South America. www.automotivelogisticsconferences.com Automotive Logistics magazine www.automotivelogisticsmagazine.com is the only global print publication covering the logistics sector of automotive. It circulates worldwide to senior executives at car-makers, tier one suppliers and service providers. There is a free weekly news service by email/web, with registrations through the website. Every issue also includes Finished Vehicle Logistics magazine www.fvlmagazine.com, which is unique in its coverage in print of the outbound sector. Both magazines are also available in full online with registrations through their websites. All these activities are published by Ultima Media Ltd, a provider of information and media in print, online and at events which is dedicated to the global business-to-business automotive sector. www.ultimamedia.com