The strategy to grow beyond good news
Tuesday, 28 de November de 2017
After investing and renewing itself, FCA moves to a 4.0 Industry amid signs of economic recovery in Brazil
by Davide Mele *
In the Inflation Report released at the end of September, the Central Bank raised Brazil’s GDP growth projection from 0.5% to 0.7% this year. For 2018, there was an even higher growth forecast of 2.2%.
There are other signs of a gradual recovery in the economy: direct foreign investment of $ 75 billion; exports of $ 210 billion; surplus in the Balance of Trade of 61 billion dollars – more than the 45 billion in 2016. The Brazilian economy stopped falling, it reached the bottom of the barrel and now has initiated a discreet process of recovery.
Regardless of the climate of political crisis, it’s important for the economy to grow again. It is hoped that these two spheres, economy and politics, can be separated, and the field of business not be paralyzed by political problems.
The performance of the auto industry, which represents more than 20% of GDP, illustrates this trend of slight recovery in the economy. From January to September, more than 1.5 million cars and light commercial vehicles were registered in Brazil – up 8.6% with regards to the same period in 2016, but still 42% below the record we reached in 2012, when we sold, 3.6 million vehicles. The production of the automotive industry is growing at an even greater pace. It is expected to reach 2.6 million units by the end of this year – a 25% growth over 2016. Exports will grow more than 40%, adding 750 thousand vehicles by December. A relevant result for the entire Brazilian industry, including the fact that it impacts on other industrial sectors in the chain.
The fact is that the automobile industry invested heavily in Brazil. The sector is more competitive, with more than 20 companies installed and producing in the country, and many others importing. Since 2012 – when InovarAuto increased the level of nationalization of vehicles, improved its energy efficiency and vehicle safety – we have been living a new cycle of investments. InovarAuto concludes this year, leaving a legacy of innovation and new investments, taking the Brazilian industry to standards closer to global ones.
In this scenario, FCA has adopted a clear strategy of investing and renewing itself. In fact, Fiat Chrysler Automobiles is the Brazilian automotive company that has invested the most in the country in the last five years. It spent R$ 21.9 billion between 2012 and 2017, building factories, modernizing plants, developing products, technologies, production systems, reinforcing the productive chain and, above all, empowering people and generating good Jobs.
FCA is also the company that has launched new models in recent years, renewing its range completely. We introduced high quality vehicles with unprecedented content that explore niches with great potential for growth. We started with the Jeep Renegade, which marked the return of the Jeep to Brazil and redefined the SUV segment in the country. Then came the Fiat Toro, where FCA leads the pickup truck segment, and the Fiat Mobi, a car designed for urban living. The Jeep Compass consolidated our leadership in a segment in which we invested and encouraged: the SUVs. And in 2017, we launched the Fiat Argo, the most complete hatch in its class, as well as the global family of Firefly engines, produced in the world’s most advanced FCA plant, built in Betim. This long cycle of investments will be completed in the coming months, with two launches that will move its segments.
The new products will boost exports. By the end of 2017, FCA will have exported 145,000 units, mainly to Argentina, Mexico and other Latin American countries – representing a 61% increase over last year.
This long cycle of investments has resulted in the construction of the most modern industrial plant of the group in the world – the Jeep Automotive Plant in Goiana, Pernambuco, which includes in its perimeter a supplier park with 16 companies. We also invested in the modernization of the Jeep Automotive Plant in Córdoba, Argentina, which is preparing to launch a model destined for the Latin American Market.
The investments were also focused on the modernization of the Fiat Automotive Plant in Betim, MG, the largest industrial plant in the world. The factory was inaugurated 41 years ago and has already produced about 16 million vehicles, of which 3.5 million of those were for export. In fact, the modernization of Betim is an ongoing project. We have installed a new line of high-speed presses, which improves the efficiency and quality of the process and new robots that increase the quality of the production process. We built in Betim the largest painting booth of the group in the world.
We implemented new air transportation systems and created the Consolidation Center, which will increase our logistics efficiency. We created the Component Center for zero-tolerance component testing and testing for defects. The Development Center integrates into a single space development areas such as engineering, manufacturing and quality. And we installed the Value Optimization Center (VOP), which brings together strategic areas of FCA with suppliers, to increase the value of the product, through quality, cost and time-to-Market.
The Fiat Automotive Plant houses the Engineering and Design Center, capable of designing, developing, testing and producing standard vehicles. We have attracted many suppliers to Betim, in a process we call “mineralization”, which allows the factory to be supplied from components produced by an industrial park which consolidated within the radius of influence of the factory.
From the technology and production systems implanted in Pernambuco, the concepts of Industry 4.0 spread to Betim and Córdoba.
We have made a lot of progress, but we have to keep moving forward. If we want to be pioneers, we need to innovate, discover and open new market segments; invest and believe; create products with high added value; seek the best global technology, and add it to the local talent; create a partnership with its value chain; focus on the consumer. But for this you need a business-friendly environment.
Thus, we designed the Automotive Agenda, a strategic map for the development of our industry, in order to make it more competitive in Brazil and abroad. We want to strengthen and expand the production chain, with an emphasis on suppliers, modernizing companies and attracting new companies that contribute and develop new Technologies.
The agenda includes strategies for the recovery of the supplier base, for the location of technology, research, development and engineering, as well as energy efficiency, with emphasis on ethanol as clean fuel, vehicular safety, vehicular technical inspection and resolution of logistical obstacles. It’s a proposal from the sector for the new sectoral policy that the government is elaborating, called Rota 2030 or Route 2030.
FCA is the company with the most ambitious investment plan for the coming years. To fulfill such investments, however, these plans require a predictable business environment, with respect to agreed rules, legal certainty, clarity of standards and long-term predictability. Brazil needs, more than ever, the resumption of productive investments in order to overcome the longest recession in its history. To do so, it needs to reassure investors a long-term, predictable horizon, with continuity of reforms, simplification of the tax structure and investments in infrastructure and logistics.
* Davide Mele is Deputy CEO for Fiat Chrysler Automobiles in Latin America
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