AUTO INDUSTRY NEWS

Auto industry forum highlights AFPC Awards '09

Auto industry forum highlights AFPC Awards '09 image

Text: / Photos: | posted July 07, 2009 00:00

A gathering of the local auto industry's top executives, the recognized movers and shakers of the sector for an open discussion of the industry's present health highlighted the launch of the 2009 Auto Focus People's Choice Awards, the annual public poll organized by Sunshine Television (STV) to determine the Philippines' most popular automobiles last Thursday, June 25 at the main ballroom of Valle Verde Country Club.

The 1st Auto Focus Industry Forum tackled the theme: "The State of the Automotive Industry - Outlook for 2009 and the Next 2-3 Years." Moderated by STV Chairman/CEO Ray Butch Gamboa and attended by industry executives and the motoring media, the forum panel consisted of some of the most respected movers and shakers of the local auto-making industry among whom were: Keiji Takeda, President, Isuzu Phils.; Daniel Isla, President, Lexus Manila; Atty. Alberto Arcilla, President/CEO, Viking Cars Inc. (Volvo); Greg Yu, Chairman, CATS Motors Inc. (Mercedes Benz/Chrysler); Rick Baker - President, Ford Group Phils.; and Mel Dizon, Senior VP, Mitsubishi Philippines & President of Truck Manufacturers Association along with Undersecretary Elmer Hernandez, who heads the Industry and Investments Group (IIG) of the Department of Trade & Industry (DTI).

Back-dropped against a world-wide decline in automobile manufacturing and sales that has seen leading automakers in the U.S. file for Chapter 11 government assistance and the top car companies declare unprecedented revenue drops, the discussions focused on what effects these are having on the local market and what these bode in the next 2-3 years.

Isuzu's Takeda opened the discussions by pointing out that as of April 2009, year-to-date (YTD) production has dropped by 48% in Japan and sales are 77% that of last year over the same period. To bolster manufacturing, the Japanese government started providing incentives and assistance for fuel-efficient cars since April in the hope that development and production of hybrid automobiles will stimulate the Japanese market. Locally, Isuzu is setting its' sights on a target of 120,000 vehicles and are confident that demand arising from OFW remittances will stem the tide in 2009. Takeda said that going forward: "The key is to continue meeting customers' requirements for products and good after sales services."

Lexus' Isla agreed with Takeda's assessment of the Japanese market, even as automakers such Toyota attempt to manage low profitability by introducing new production efficiencies and cost-cutting measures to stabilize vehicle prices, and further added that the market has begun shifting towards smaller, cheaper models that are less prone to the travails of rising fuel costs. "Pricing must be carefully controlled since price hikes drag demand and unit volumes down." Isla indicated. "But premium brands like Lexus, though niche in scale, provide another welcome upmarket option to a segment that tends to be more selective with their buying choices. That's why Lexus has entered the Philippines despite the trying times."

Viking Car's Arcilla explained that Volvo's introduction of new models, maintaining the company's trademark safety proposition, continues to whet the market's appetite with the company aiming to sell 340,000-375,000 units worldwide. Sales in Asia continue to grow, and in RP, the introduction of the Volvo XC 60 helped increase local volume. "The Philippine market for our models, niche cars as they are, will continue to be driven by new models in the near term. Alongside this, improved sales and after sales services will also be crucial." Arcilla said.

CATS Motors' Chairman Yu seconded the upmarket trend and mentioned that despite a hefty decline in unit sales that has seen Mercedes Benz doing 20-30% versus last year for passenger cars worldwide, the local market for such a premier brand has reacted more positively. "Except for April, Mercedes Benz has had month-on-month increases this year." Yu revealed: "And our May 2009 was better than 2008. The E Class models really helped to hold demand and volume." Yu also added that there has so far been no need to invoke contingency plans for a 40% drop in sales since the current decline stands at just 15%.

As for the Chrysler brand, Yu talked about the US government being solidly behind the company in its bid to eventually rise above Chapter 11 assistance and the finalization of a deal with Fiat of Italy that will provide the US automaker with the smaller models they didn't have. Yu remarked that despite local Chrysler sales being down 50% vs. 2008, they had expected worse. "In fact," Yu cited: "we are running low on inventory because the abrupt drop we were anticipating hasn't come."

Ford Group's Baker referred to the 36-37% decline in the 14.5 million unit a year US market, where volume is now at its lowest since the 1980's. Ford had the highest US market share in May and as Baker emphasized: "Ford has no plans of seeking US government help. Since 2006, the company has been preparing for more difficult times ahead. We embarked on our "One Ford, One Company" strategy that focused on global re-structuring and new product development, and ensured there was enough money to finance these initiatives." Baker explained that in the 21 million unit Asia Pacific/Africa market, YTD sales have reached 9 million, down only 5% vs. last year, with China up 10%. In the Philippines, the forecast is up 4% from 2008 but is likely to be flat. He stressed that: "We have revamped our local product line-up over the past 10 months and we see our exports to Thailand, Malaysia and Indonesia holding up. Key in the RP market is the continued availability of suitable financing for vehicle buyers, as well as OFW remittances."

Mitsubishi's Dizon declared that the company is targeting to grow from 6,870 to 8,750 units this year with a wider and enhanced line-up of models. He also referred to the truck market that is forecasting a slight growth of 1,000 more units from 124,000 in 2008. As to why the local automobile and truck markets appear to be somewhat bucking the negative trends in more industrialized markets, Dizon stated: "Three factors mainly. One is the resiliency of the RP economy. Secondly, the stable peso translates to stable pricing. And third, auto loans are driving sales since the local banking industry has largely been unaffected by the global crisis."

For his part, DTI Under-secretary Hernandez compared the current industry performance to that of the period following the 1997 IMF crisis. He noted: "After the industry posted its best performance of about 162,000 units in '96, the '97 crisis kicked in and by '98, sales were down to some 80,000 units. In 2008, the industry posted about 124,500 vehicles. And current year-to-date indications don't point to things being as negative as they were in the late 1990's. We seem to be in better position now than at that time." Nonetheless, Hernandez exclaimed that DTI's Board of Investments (BOI) is in constant consultation with heads of the local automotive industry to ensure the Motor Vehicle Development Program created under Executive Order 156 undergoes continuing amendment as ongoing circumstances demand.

In closing the forum, STV's Gamboa summarized that: "There are appears to be a general consensus amongst the gentlemen present. The times are indeed very challenging for both the automakers and the buying public as brought about by developments abroad that have impacted the country. However, we may be in a period of sales decline compared to 2008 but by and large, the effects on the local automotive industry haven't been as adverse as initially anticipated. Despite the bad economic news that seems to prevail worldwide, our local automakers and distributors appear to have things in hand having anticipated the difficulties ahead and having appropriately prepared for it." STV shot and taped the entire forum live and will subsequently feature this in TV episodes of Auto Focus in the coming weeks.