The Chrysler drama continues to unfold everyday as the principal actors - the Federal Government, the Big Bank creditors, the small bond holders, the UAW, the Bankruptcy court, FIAT, GM-Europe, the bidders for Opel, the German Unions, the Swedish Government, GM Latin America - are all tugging each way.
At least being under Section 363b of the Bankruptcy code makes the Federal Government the de facto financier of warranty claims for all of Chrysler's current products. The Federal Government, has so far bankrolled dealers and parts suppliers, with finance just to keep business going. Plants will have to remain shuttered for a while as the Bankruptcy court decides on which assets are ripe for auction sale or for acquisition by the remnants of Chrysler's LLC, as owned by a diverse party of investors and creditors, which includes FIAT.
Of FIAT's current line up, the Cinquecento minicar, Punto subcompact and the Grande Punto and Bravo compacts will still have to hurdle federalization as the last time FIAT even glanced beyond the Atlantic to sell cars to North American specifications, front wheel drive was just a new plaything.
What will definitely be wound down is the shared 2.0 to 2.4 liter 4cylinder engine manufacturing joint venture between Hyundai, Mitsubishi and Chrysler. This also spells the end of the shared platform that spawned such diverse off springs like the Dodge Caliber and Jeep Compass, with some shared parts modules with the Mitsubishi Galant Fortis [Lancer EX here] and Outlander, just to name a few.
CATS Motors, Chrysler's local distributor see no problem in supplying the local market with the favorites of Chrysler's line up. In the immediate future, expect to see fresh stock of Jeep Wranglers, Dodge Journeys, Chrysler Town and Country and the Chrysler 300C. In the mid-term, the new Jeep Grand Cherokee is in the pipeline, along with the new Jeep Commander, which shares its platform. New engine variants for the Town and Country, 300C, Commander and Grand Cherokee are also in the pipeline.
GM Philippines is relatively unscathed from the malaise that is also pushing GM Detroit to possibly file for bankruptcy by June 01, 2009. GM Philippines is an affiliate of the far more profitable GM Asia Pacific, which is composed of GM Thailand, GM Australia and GM China. Expect a steady stream of 7-seat Chevrolet Captiva diesels and the Opel-Astra based new Chevrolet Cruze to arrive soon to replace the Optra. In the future, expect the new models of the Chevrolet Spark and Aveo to continue GM's objective to round off a complete product line. Whatever happens to GM-Europe and Opel, the Opel Insignia based mid-sized Buick New Regal is already being made in China and can easily be exported to Thailand as kits for assembly and rebadging as Chevrolets to take advantage of the ASEAN's lower tariffs between members.
Having no supply problems from large unsold stock in North America, GM Philippines, in the near future, can still supply the existing demand for Chevrolet Tahoe's and Suburbans. As to its contribution to local employment, GM Philippines continues to outsource English speaking service demands for GM North America to Philippine based BPO's that hire several thousand Filipinos.
GM and Isuzu
With GM ASEAN as the current supplier and assembler of Isuzu D-Max compact pick up trucks, Isuzu is assured of supply of the next generation GM compact pick up platform that will replace the Chevrolet Colorado/Isuzu D-Max. GM also supplies Isuzu D-Max from its own engine factories and future upgrades of diesel engines will come from either the Korean or Thai diesel engine plant owned by GM. In future, GM will be less restricted in selling its own compact pick up version in markets where Isuzu sells Isuzu pick ups.
Away from the Wolfsburg-Stuttgart tussle of who owns whom [Porsche over VW or VW over Porsche] chances are Porsche's debt load will lead it to accept being VW's 10th brand, under a revitalized Auto Union, the Nazi era corporate name of a collection of brands that included Horch and Audi, which spawned VW.
After a long courtship, VW called it quits in its attempt to establish an assembly foothold via Proton in Malaysia. Instead VW is heading to Indonesia where it will partner with Indomobil to assemble the Touran MPV, slated for introduction earlier than 2012.
This opens the doors for VW to enter the ASEAN market with its preferential [low] tariffs among ASEAN members. PGA, current distributors of Audi and Porsche can be an interested party but it becomes incumbent on VW AG to untangle itself from the contracts it has made with previous Audi and VW distributors in the Philippines, as VW AG's executives face charges in Philippine courts.
The future of Local Assembly in the Philippines
There is an old rule of thumb that says that for a car factory to reach break even point, it should at least produce 200,000 of the same model - one variant, limited choice of colors, one spec level. But modern flexible manufacturing has stamped paid to that old belief. Now, several variants and trims combinations can be made on one assembly line, the speed of which can be varied to produce far less cars using far less automation.
Proof of the "profitability of flexibility" can be found in Ford Group Philippines assembly operations. Geared more for export, the Greenfield Tech Park plant in Sta. Rosa, Laguna produces far more for the export market than for local consumption. Today it produces right and left hand drive versions of the Ford Escape, Mazda Tribute, Ford Focus and Mazda3. The Ford plant is equipped to do a quick model changeover when the need arrises, especially when the next generation of Escapes and Mazda3's arrive.
Also, the current sales success of the Honda City and the Honda Civic, both produced in Honda's Laguna Tech Park facility, proves that for our local market, the combination to tax holidays and localization, allows Honda to quickly adapt to changing number of orders and specifications tastes. Philippine made Honda Cities and Civics are one of the cheapest in the world, considering the level of standard equipment these cars carry.
As for Toyota, the Corolla-Altis's move up-market allowed Toyota Sta. Rosa to dedicate more capacity for local production of the Vios and the Innova. The continued lead of both Philippine made models in the sales charts again give these 2 Philippine made models a pricing/value for money advantage over the Malaysian sourced Avanza and the Thai sourced Corolla. Toyota also mounts passenger bodies on Thai made Vigo/Hi-Lux pick up and cab chassis.
There was talk to a return of limited local assembly for Asian Carmakers when it regained BMW late last year, but we can only speculate that the high degree of personalization of the MINI rather than an entry-level BMW 1-series, would be more suited for limited numbers for local assembly. This remains a pipe dream, unfortunately.
Elsewhere, there is plenty of spare assembly capacity in the STAR motors plant in Sta. Rosa as it used to build Volvo's in the late 90's, apart from Nissan Frontiers and Patrols. Up for consideration is localization of the Hyundai H200 [old body Starex] for special commercial applications [catering, ambulance, school bus, etc.] and Hyundai H100 Porter commercial vehicles. Columbian builds the KC2700 in Bicutan while Isuzu builds the Crosswind, IPV, and NHR in Sta. Rosa. Isuzu even exports Crosswind assembly kits to Vietnam and CBU's to Central America. Mitsubishi still part-time builds the L300 Versa-van, the Adventure and the Fieldmaster in Cainta. Nissan Sta. Rosa or NMPI continues to build the Sentra, X-trail and Livina.
Yes, for a small market like ours and despite impending tariff reductions with ASEAN and Japan, the employment and profit opportunities for local assembly are still there for slower and smaller production runs, negating the need for high speed robotized production lines. Afterall, the relatively small volumes of the Philippine new car market is due to it being really a rich man's one.
With a population of close to 100million, with some 1.0% ready and able but not always willing to buy a new car or a used car at any one time, it really is a small market when it averages 100,000 new motor vehicles a year, with some 180,000 used vehicles changing ownership in a year, from a total car population of a little over 2.5 million. No wonder annual sales increases and decreases in the past few years varies by as little as +/- 10.0%. The finance hurdle to own or purchase a car is far higher than the population's median income.