© Reuters. FILE PHOTO: A technician from the FCA (Fiat Chrysler Automobiles) assembly plant repairs respirators for use in hospitals in the company's laboratory when Coronavirus disease (COVID-19) broke out in Betim
By Marcelo Rochabrun and Anthony Esposito
SAO PAULO / MEXICO CITY (Reuters) – Auto production in Mexico and Brazil, the leading manufacturers in Latin America, decreased by an unprecedented 99% in April as a result of the coronavirus crisis. The two countries only built a total of 5,569 vehicles.
In normal times, Mexico and Brazil together produce over half a million cars a month. The industry has hundreds of thousands of jobs and several percentage points of its country's gross domestic product.
"The situation is difficult and dramatic," Luiz Carlos Moraes, president of the Brazilian Automobile Association, told reporters.
The production declarations made on Friday by the Mexican statistics association Inegi and the Brazilian association Anfavea-automakers are the first window available to the extent of the crisis for automakers in Latin America.
The coronavirus pandemic threatens jobs and raises questions about the sustainability of the industry's international supply chains, much of which can be traced back to China. The bad results can also be used by auto managers to get government aid.
Both countries have avoided layoffs so far, but depend heavily on when production can resume and whether there is a demand for cars in this case. Mexico could provisionally resume production on May 18, while Brazil's top automakers are considering a restart in June.
According to industry reports, the restart in Mexico will ultimately depend on President Andres Manuel Lopez giving Obrador the green light.
Mexico and Brazil are key bases for global automakers, including General Motors Co (N :), Ford Motor Co. (N :), Volkswagen AG (DE 🙂 and Fiat Chrysler (MI :).
Domestic deliveries from Mexico, which are more dependent on exports to the United States, fell 90% compared to March to only 27,889 vehicles, said Inegi from Mexico.
Brazil focuses more on its home market, but is a major exporter to Argentina. According to Anfavea, exports fell by 77% to 7,200 units.
Overall, sales in Brazil fell by two thirds to 55,700 units. Mexico did not announce sales figures.
BRAZIL IS LOOKING FOR HELP
In Brazil, the coronavirus pandemic is exacerbating a crisis that has lasted for years and has been difficult for the industry to recover.
Brazil has the capacity to produce more than 400,000 cars per month as expensive bets were placed just before the country experienced the worst economic crisis of all time in 2016.
The corona virus crisis can far exceed the damage caused at that time, from which the auto industry has never fully recovered.
There, automakers are negotiating a government aid package that was originally expected to be resolved.
A pending question is what is used as collateral for any loans.
Moraes told reporters that automakers are proposing to use around 25 billion reais ($ 4.34 billion) in tax credits as collateral that automakers could not use.
The loans would be made by private banks, Moraes said, but secured by the Brazilian state bank BNDES, which itself would be secured by these tax credits.
"The federal government would have had a sum from the federal government as security," Moraes said, noting that such a structure was never used.
The proposal was submitted on Wednesday, and automakers are still waiting for a government response.