Venezuelan economic crisis hits hard on local auto industry

Article by Andrew Christian, on August 13, 2014

The current economic crisis in Venezuela already has its fatalities, and the auto industry is one of them. Prior to the crisis, assembly lines in the country had been bustling. But now, the story is different. Carmakers are hurt by an economy characterized by a stagnation in oil production and a badly managed currency control system that makes it harder for private companies to access foreign currencies as well as import supplies.

Consider Jeep’s Valencia assembly plant. The site – once home to over 1,000 workers – built its last car five months ago and employees were sent home after raw materials ran out. Union leader Henry Ospina told Reuters that Chrysler is asking for the layoff of 119 workers.

He said that Chrysler told that it has become harder to maintain staff costs. Chrysler is not the only one feeling the heat in Venezuela. Sites operated by Ford Motor Co., General Motors, Toyota Motor Corp., Iveco, Mack, and Mitsubishi Motors Corp. are all working at minimum capacity.

In fact, vehicle output so far this year has dropped 83 percent year-on-year, with just 7,000 cars built, compared with around 43,000 in the same period in 2013. In July alone, carmakers just built 876 vehicles, representing 87-percent fall from the same month in 2013, according to the Venezuelan Automotive Chamber.

According to the auto industry, the national government currently owes it around $1.9 billion in dollar liquidations. Although officials denied currency problems, dollars do sell for VEF70 – over 10 times the lowest government exchange rate of $1:VEF6.3. Francisco Ameliach, governor of Carabobo state where Valencia is located, vowed to protect workers while speed up access to dollars for carmakers. [source: Reuters]

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