Car industry recovers orders

Reborn in the 2000s, the car industry had its worst year in 2009. Highly dependent on the mining sector, its sales fell 80%, and two of the four biggest factories established in the country suspended their production. With about 70% of the market – all fueled by the local industry – Amsted-Maxion sold 570 cars in 2009, compared to 4.3 thousand in 2008. But the company has a portfolio of 6 000 car order. Usiminas Mecânica, one of the factories which suspended its commercial production last year, will be back on the sector and will invest US$$ 28.3 million to double its production capacity from 60 to 100 cars per month. In its projection, by 2016 the country will require 25 thousand cars.

With an installed capacity of large dimensions – the unity in Hortolândia has 1 million square meters, designed to produce 10 thousand cars a year – Maxion went through a difficult adjustment last year. Shut a smelter in Osasco (SP) and made cuts in its two other units. From the 4.5 thousand employees, the company now has 1.9 thousand.

But Amsted-Maxion started to hire workers again, and now has 2.3 thousand employees, says Ricardo Chuahy, president of the company. From the middle of last year the orders came back, in part motivated by the prospect of overcoming the crisis, partly by government countercyclical policy – BNDES lowered its interest rate Finame for capital goods, to 4.5% per year. The crisis has not suspended the orders, only diluted them as times went by, said Chuahy.

With the new landscape of cheap credit, something unprecedented happened in Maxion: the long term contracts. Vale has placed an order for 4.5 thousand cars, 500 of them in 2010. Other units will be delivered in 2058 and in 2011 there is an option to purchase another 1982 cars in 2012. MRS, one of the biggest freight companies, did the same: bought 344 cars this year, and will receive 1044 in 2011. So, if Maxion do not close any contract over the next three years – something unlikely – the company has ensured a average demand of 2 thousand cars per year.

At Usiminas Mecanica, the low demand period is being used to put its house in order, waiting for better times, says the superintendent of casting, forging and cars, Jaime Cru.

“We will use this year to take a big leap in 2011”, says Cru. In 2009, the company provided only a few cars for Usiminas, and produced prototypes of a new car with a capacity of 150 tons, designed to run on Carajas railroad. And also, it has closed a deal to absorb technology from American Standard Car Truck for the bogie production – sets of wheels – used in cars today, acquired from third parties. The processing capacity is 2 tons per month – equivalent to about 3 thousand bogies. The expectation is that from the 2 tons of bogies processed, 1.5 billion will be exported – acquired by the Standard itself.

At the moment, Usiminas Mecanica has a US$ 14.16 million contract – 80 cars – with CSN, and is trying to close one of 200 units with Vale and Mitsui. In order to stay connected with the market, Maxion plans to invest for double its capacity.

Randon, the second largest car factory in Brazil, was the only one that did well last year, selling 436 cars – the best result since 2005. It had good orders from new customers, such as Rumo Logistica and Ferrovia Centro Atlântica (FCA), a Vale’s subsidiary, which is continuing to grow. Santa Fe’s car factory, controlled by ALL Logistica, is with the production of new cars suspended, and now concentrates on the refurbishment business.

Mr. Chuahy believes, in the long term, that the market will be impacted by the new rail investments that are underway in the country such as Norte-Sul expansion, Ferronorte, Transnordestina, Ferrovia Oeste-Leste and Ferroanel. From the total, the projects amounts 5.7 thousand kilometers – not counting the Ferroanel, which still has no trace. In a more modest calculation, with reference to the current network, every 1 thousand km of road would mean 3 thousand cars more operating.