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Customer LoginsBrazil negatively impacts GM performance in Q1
While celebrating its "solid first quarter operating performance," General Motors reported that its South American operations lost USD214 million, from USD156 million in the first quarter of 2014. Wholesale vehicle deliveries were down "primarily attributable to Russia and Brazil," and there was an impact from "foreign currency translation, primarily associated with euro, British pound, Brazilian real and Venezuelan bolivar."
In March alone, the dollar appreciated 11.8%, pushing the Brazilian real down 20% in the first quarter of this year. That is bad news for a company that, like GM, cannot take advantage of the devaluation to increase its exports. From Brazil, GM exports basically only to the Mercosul countries - and Argentina, Brazil's main export market, has imposed several trade barriers that have hurt OEMs, besides dealing with a weak market of its own. Registrations of made-in-Brazil Chevrolet vehicles fell 11% in Argentina between January and March 2015 from a year earlier.
Registrations of Chevrolet products plummeted 18.2% in Brazil and 15.2% in Argentina during the first quarter of this year, in a market that shrank 16.2% and 27.8%, respectively. In Venezuela, sales were up over 1,000%, but do not let the numbers fool you. This huge increase was possible only because 2014 was abnormally low, and the total this year remains below 2,000 light vehicles.
Looking at production, GM is falling behind some of its main competitors. In Brazil, output from its three factories plunged 25.3% in Q1 2015, more than ten percentage points the total industry. Only PSA and FCA had worse performance. Volkswagen performed a little better than its peers and Ford actually had better figures than last year thanks to the new Ka. Even dealing with capacity constraints while building a second plant, Honda expanded its production by 20.1%.
But there is some good news for GM. Chevrolet is the retail leader in Brazil, and it is always more profitable when consumers go to the dealer network for their purchases. The make ended the first three months of the year with an 18.8% retail share, ahead of Fiat's 16.7% and Volkswagen's 14.6%. In the total market, Chevrolet is widening the gap with Volkswagen, which lost its second place last year by just 2,217 units. Year-to-date, Chevrolet is 6,595 units ahead of Volkswagen.
The Chevrolet Onix was the best-selling nameplate in retail and the Prisma was the fifth most popular choice. Only Chevrolet had two models among the Top 5 nameplates - Fiat, Hyundai and Volkswagen had one vehicle each.
"We are going to get out and stay in front of this," GM Chief Financial Officer Chuck Stevens said about the situation in Brazil. Although the IHS Automotive light vehicle sales forecast for 2015 anticipates that the company will sell less than 500,000 units for the first time since 2006, Brazil remains a critical market for GM. It is the OEM's third main market, behind China and the United States. But only a new wage of new products will bring growth, something not expected before 2019.
Augusto Amorim is senior analyst, South American light vehicle production forecast, IHS Automotive
Posted April 27, 2015