Hot wheels: awash in money, Latin American governments beef up their fleets of shiny new automobiles.No matter what political party is running the government, no matter how good or bad the economy may be doing, government officials still need a ride to work. For automobile companies, moving everyone from the president down to oilfield engineers means steady business.
Brazil's automobile industry automobile industry, the business of producing and selling self-powered vehicles, including passenger cars, trucks, farm equipment, and other commercial vehicles. , Latin America's largest, hopes the boost its sales to the government this year, despite a squeeze play in effect: The federal budget was approved late, in April, long after it should have been. Then there's a 90-day freeze on public tenders prior to the upcoming vote. The reduced sales window has crimped crimped
said of grain that has been passed through corrugated rollers after previous exposure to moist heat so that the grain is fractured but there is a minimum of dust. forecasts for government automobile purchases for this year, the rosiest of which predicted 40% growth. Nevertheless, assembly plants in May projected sales of up to 23,400 automobiles to the government in 2006, an 8% hike from a year earlier.
Brazil's public-sector automobile fleet holds 180,000 vehicles. Carmakers say public-sector entities renew 10% of their fleets each year, often through new-car purchases. Most new vehicles are those that are driven hardest and most frequently, such as ambulances and police cars and vehicles for the education sector, including new school buses. Brazil's government does not divulge what it specifically spends on automobiles. Government budgets for purchasing cars also finance car rentals, maintenance, fuel, lubricants lubricants
preparations for the lubrication of passages to reduce frictional injury, e.g. oily preparations, including petroleum jelly, lanolin or water-soluble preparations such as methyl cellulose. and accessories. Last year, that total figure came to US$335 million for the executive, legislative and judiciary branches of government.
Despite the election year, the law does allow tenders for ambulances and police cars. Yet expect politics to gum up gum 1
a. Any of various viscous substances that are exuded by certain plants and trees and dry into water-soluble, noncrystalline, brittle solids.
b. A similar plant exudate, such as a resin. delivery just the same. "Sales can get confusing because politicians want to be there at the deliveries," says Frederico Themoteo Jr., director of sales at General Motors do Brasil, the Brazilian subsidiary of the U.S. auto giant and one of the largest suppliers to the government for the health and security sectors.
Delays in approving the 2006 budget in Brazil threw a curveball for GM. "Historically, election years at the federal and state levels mark the high-point of sales in our sector, but this isn't the case due to the huge delay approving the budget," says Themoteo Jr. "As of the middle of May, we had sold 2,500 units, a 25% decrease from the same period a year earlier," he says. Though the government can step up purchases throughout the rest of the year, a car company is limited when it comes to meeting specific government demands. And only so many cars can roll off the assembly line at a time. "Vehicles go through changes on the assembly line and there are specifications that specialized, third-party enterprises such as police departments and fire-rescue squads will need," says Themoteo Jr. He sees GM producing 570,000 vehicles in total this year.
Timing. GM expects to sell 7,000 of those to the government, a figure that would account for about 30% of all government car purchases. That's because, two years ago, the federal government decided to the buy and distribute a large number of vehicles for states and municipalities. Everything is now at the mercy of the timing of federal tenders, says Themoteo Jr.
Yet the government does buy automobiles on a regular basis and wants to do as fairly as possible, says Luiz Fernando Correa, Brazil's national secretary for public safety. "We centralized cen·tral·ize
v. cen·tral·ized, cen·tral·iz·ing, cen·tral·iz·es
1. To draw into or toward a center; consolidate.
2. to gain scale and ensure ourselves a reasonable price for the states. We found we could obtain savings of 25% to 40% in line with vehicle specifications," Correa says. "Before, we had to conduct 27 auctions, one for each state, and today we do only one."
Volkswagen do Brasil Volkswagen do Brasil Ltda. is a subsidiary arm of Volkswagen Group, established in 1953. Brazilian developed Volkswagen's
Many of its models were designed especially for Brazil:
intr.v. per·tained, per·tain·ing, per·tains
1. To have reference; relate: evidence that pertains to the accident.
2. to quantity, color and specialized equipment," Migues says.
Fiat do Brasil also wants to take a slice this market. "We are going to have a 35% stake of the total," says Joao Claudio Bourg bourg
1. A market town.
2. A medieval village, especially one situated near a castle.
[French, from Old French, from Late Latin burgus, fortress, , director of commercial vehicles and direct sales at Fiat. Besides healthcare and security vehicles, Fiat sells to telecommunications and other sectors. The Italian carmaker expects to meet its sales goals before the 90-day ban on government tenders takes effect. Fiat also exports 100,000 vehicles a year, 50% to Argentina alone, and says overseas governments are busy buying vehicles manufactured in Brazil. "We are structuring a direct sales commission in all Latin American countries List of American countries
Most Latin American countries won't say how much they spend on automobiles. "The government's reason is strategic and doesn't reveal this information," says Luiz Ulrich, head of planning and fleet and government sales at GM in Chile. "We estimate that our sales to government entities account for 16% of GM Chile's sales. We believe that figure reflects the level of the government's involvement in the industry for domestic vehicles." In Chile, GM sold 33,709 vehicles, making it a market leader with a 17.4% stake in a total market of 193,282 vehicles, according to according to
1. As stated or indicated by; on the authority of: according to historians.
2. In keeping with: according to instructions.
3. Ananc, the country's automotive association.
Ulrich thinks government spending Government spending or government expenditure consists of government purchases, which can be financed by seigniorage, taxes, or government borrowing. It is considered to be one of the major components of gross domestic product. on vehicles will pick up this year, for three reasons. First, economic growth in general spurs demand for automobiles. Secondly, windfall windfall
An unexpected profit or gain. An investor holding a stock that increases greatly in price because of an unexpected takeover offer receives a windfall. government profits of an estimated $9 billion on soaring copper prices means aging fleets will likely be renewed, and lastly more spending on social programs implies additional transportation needs, Ulrich says. "In other words Adv. 1. in other words - otherwise stated; "in other words, we are broke"
put differently , we believe that the government will not only buy more vehicles in 2006, but the government slice of the cake will be bigger." GM Chile's biggest customers include state-owned copper giant Codelco and the Chilean national police force, which awarded GM in April a bid for 300 vehicles.
Big oil Likewise, state-owned companies in other parts of Latin America Latin America, the Spanish-speaking, Portuguese-speaking, and French-speaking countries (except Canada) of North America, South America, Central America, and the West Indies. represent a big opportunity for automakers. Huge oil companies, for instance. "PDVSA PDVSA Petroleos De Venezuela, SA in Venezuela and Pemex in Mexico, Petrobras [in Brazil], they're all buying," says Ray Anrecio, manager of regional fleet sales for GM Latin America, Africa and the Middle East. He estimates a 15% climb in sales compared to last year, in part on the oil companies in emerging economies.
The beauty of selling to government is that, good times or bad, big state-owned monopolies always spend. Many state-owned companies buy fleets for their main offices as well as light commercial vehicles for work in the field, Anrecio says. Selling to government is no easy task, though. The competition is fierce. "I will tell you that, in Brazil, it's a dogfight. Two years ago, we had market leadership from Volkswagen for the first time in quite a few years,"
Anrecio says. "Last year, we lost it, but not by much. It's always neck and neck." Anrecio sees the real task at hand as developing sales across the region. Private sales, for instance, account for 26% of fleet sales in the region. Globalization globalization
Process by which the experience of everyday life, marked by the diffusion of commodities and ideas, is becoming standardized around the world. Factors that have contributed to globalization include increasingly sophisticated communications and transportation , too, has pushed companies to buy across borders, looking for Looking for
In the context of general equities, this describing a buy interest in which a dealer is asked to offer stock, often involving a capital commitment. Antithesis of in touch with. leverage on price. "Our role is really to develop fleet sales across the region. We've certainly seen a significant increase in our fleet business as it now represents more than 26% of our total sales in the region," says Gary West, GM regional fleet development manager. "So we're seeing a lot of opportunities, basically in the last two years."
FORREST JONES * MIAMI Miami, cities, United States
Miami (mīăm`ē, –ə).
1 City (1990 pop. 358,548), seat of Dade co., SE Fla., on Biscayne Bay at the mouth of the Miami River; inc. 1896.
MARGARIDA O. PFEIFER * SAO Sa´o
n. 1. (Zool.) Any marine annelid of the genus Hyalinæcia, especially H. tubicola of Europe, which inhabits a transparent movable tube resembling a quill in color and texture. PAULO