Hear
Ford inaugurated this week its new engine plant in its Pacheco industrial center, an investment of US$80 million that was part of the US$660 million disbursed in total to renovate the factory and produce the new generation of the Ranger pickup from mid-2023. After the opening ceremony, Martín Galdeano, president of Ford Argentina and South America, spoke with LA NACION on investment, the market situation and the competitiveness of the industry.
– Did the idea of locating engines come after the Ranger project was approved?
– Yes, it was in two stages. First it was the new Ranger project and then the engine project. We could easily have imported engines, but (making them here) gives us much more flexibility when it comes to producing, changing production mixes and adapting better. Today, it does not bring us better costs, unfortunately, but when we proposed the project it generated more efficiency. We trust that when taxes are normalized it will be achieved.
– The Government announced the reduction of tariffs for the import of parts. Is it already implemented?
– I see that there is a good understanding everywhere. To produce and export in a project of this magnitude you need to be competitive, and the tax and regulatory framework is very important. There are actions that are being taken, such as having a different regime when one imports to export, such as the Customs factory that we have here. The PAIS tax is being discussed these days and that is important, because it hits us squarely in our export competitiveness. It is very important that it is being discussed. For us it is important that the macro stabilizes, for long-term investments, but there is dialogue for everyone else.
– How much impact does the PAIS tax specifically have?
– Historically, Argentina had 12.5 tax burden points between gross income, municipal taxes – which we do not pay to export, but our suppliers do – and tax on debits and credits, and today it is between 20 and 25 burden points tax. Brazil has 7%, and Mexico and Thailand have nothing. When we export the Ranger, we compete to supply markets with the United States, South Africa and Thailand, which have different export regimes.
– What risk is there of losing markets if this is not corrected in the short term?
– Today we supply all South American countries. Three weeks ago I was in Chile. There are 82 registered car brands, and 60% are of Asian origin. Competing with this tax burden is very difficult in a market like Chile. We exported the previous Ranger to Mexico, and not today. Mexico is a very open country and it will not buy from us because we are Argentine, but because we are competitive and efficient in costs and quality. At the moment, it is supplied from South Africa.
– Is the expectation that the lowering of tariffs for parts will be finalized, and then a reduction in the PAIS tax?
– Yes, that is the expectation.
– The Minister of Economy said that if the fiscal package was approved, the PAIS tax would return to 7.5%…
– It’s a lot of 10 points, and 7 and a half too.
– It is a tax that should not exist and that will disappear when the exchange rate is opened…
– It would be an important change, yes.
– Can the RIGI (Large Investment Incentive Regime) help attract investments in the automotive sector?
– It is important that there is a regime of this type for long-term investments. What we proposed at the time is that we have been in Argentina for 110 years and we need the same rules of the game as for anyone who comes new. It has to be applicable to everyone. Of course, to enter the RIGI you have to make an investment of the nature that the RIGI requires [N. de R.: US$200 millones], but with the same rules of the game. They have to be equivalent.
– Isn’t that clear?
– No, that’s what we explained. It is very good, it is important for the industry and for Argentina, but the request is that it be the same for everyone, those who have just entered and those who have been there for 110 years, as in the case of Ford. The issues that I am putting on the table are to compete on equal terms. Regarding taxes, in Argentina they are very high, but all terminals compete on equal terms. To export, we do not compete with the same rules of the game as other plants, and that is a problem.
– What prospects are there for the market in the second half?
– After a first quarter that had been 30% down compared to last year, in May the accumulated drop for the year was 22%. We see a recovery and some issues helped, such as price levels that have not increased for several months. What we (for Ford) did was reflect in the prices the discounts that the dealers gave. That seems to me to have helped, and some purchase decisions encouraged by the financial dollar. If you ask me today, I see an industry of 350,000/370,000 units for this year.
– With a national engine, what local and regional content will the Ranger have now?
– We are aiming for 50% regional content. Ford already manufactured engines (the Puma) and with the new plant we continue with that model.
– At what point is the parts supply? There were terminals stopped due to the floods in Brazil last month.
– We had some supplier of the second ring with problems, but between the stock we had in the factory and that of the intermediate supplier we solved it. We do know that there were problems throughout the region and we were involved with the help of Ford and our philanthropic arm.
– Is the problem of auto parts payments with foreign suppliers already overcome?
– We are with normal supply, yes.
– What level of production do you foresee today for the entire year?
– We are expecting 15% growth for the full year. We are not going to reach 110,000 (the installed capacity of the Pacheco plant), but we have opportunities for growth.
