Ford Motor Co. has had a slow start in Brazil this year but still believes that it will set a record for the entire 2012 as it believes that sales will surge due to record-low interest rates and newly implemented tax breaks. Rogerio Golfarb, the head of Ford’s corporate affairs in South America, said that because of government measures, there would be a “really strong pickup” in the second half of the year.
Because of a recent economic boom in Brazil, its sales had more than doubled since 2005. But now, Brazil’s auto industry is struggling. In the last few months, the government of Brazil has attempted to drive up demand by cutting taxes on certain products, such as cars, and urging the central bank to lower interest rates to historic low figures.
Golfarb was interviewed this week at Ford's plant outside Sao Paulo. He said that he doesn’t believe that a 5% sales decline through May would persist until the end of the year. He said that he is confident that there would be growth in 2012. Nevertheless, analysts doubt the 4-5% growth estimated by the industry, saying that the market in Brazil may drop for the first time in almost a decade.
In response to the downturn, Brazil’s automakers have cut production by 10% in the first five months of 2012 in order to cut the size of inventories, which are nearing four-year highs.
Automakers had started to implement short-term furloughs and to offer workers with voluntary buyouts. Last month, the government imposed a significant industry tax cut. Golfarb said that the slowdown was a “passing bump” as Brazil's enormous new middle class learns to manage the previously unheard of access to credit. The lending sector is reeling with the sudden increase in delinquent auto loans.