Venezuelan auto industry in free fall amid economic woes

Issues of currency, raw materials lead to reduced production
By Eyanir Chinea / Reuters
||Last Updated: 08/08/2014

VALENCIA, VENEZEULA (Reuters) — Though it is the middle of the work day, the Jeep assembly plant in the central Venezuelan city of Valencia is empty, the machinery still.

The factory, which once employed more than 1,000 workers, made its last car five months ago. Now assembly lines at the plant, located in the oil-rich country's industrial heartland, are quiet. Workers were sent home after raw materials ran out.

Venezuela's economic crisis threatens to paralyze what was once South America's third-largest automotive industry, as stagnation in oil production and a badly managed currency control system stymie private businesses' access to foreign currencies and ability to import supplies.

"They are asking to fire 119 workers," union leader Henry Ospina, who represents employees of Chrysler, which makes Jeeps, told Reuters in Valencia. "We're fighting, but the company says everyday it's harder to maintain staff costs."

Like Chrysler, a subsidiary of Italian company Fiat , plants belonging to Ford, General Motors, Toyota, Iveco, part of CNH Industrial; Mack, a subsidiary of Swedish Volvo; and Mitsubishi are all operating at minimum capacity.

Production in 2014 has fallen 83 percent year-on-year, with just 7,000 cars built, compared with some 43,000 made during the same period last year.

Only 876 vehicles were produced in July, an 87 percent plunge from the same month in 2013, according to the Venezuelan Automotive Chamber.

The auto industry says it is owed $1.9 billion in dollar liquidations by the government of President Nicolas Maduro.

While officials have denied currency problems, on the black market dollars sell for 70 bolivars, more than 10 times the lowest government rate of 6.3.

The state will protect workers and speed up access to dollars for auto manufacturers, Francisco Ameliach — an ally of Maduro and governor of Carabobo state, where Valencia is located — promised companies and unions in a meeting last week.

Maduro, who succeeded longtime leader Hugo Chavez after the firebrand politician's death in 2013, had previously said auto manufacturers were to blame for the crisis.

At the end of last year the government accused General Motors of selling replacement parts at inflated prices, and fined the company nearly $85,000.

In February, when Toyota said it intended to close its Venezuelan plant, Maduro accused the world's No. 1 automaker of waging an "economic war" against him.

The crisis has translated into reduced paychecks, hitting the wallets of workers who are also contending with inflation of more than 60 percent.

Dozens of managers have accepted offers to leave their posts, circumventing strict labor laws that make firing employees extremely difficult, workers told Reuters.

"In all of the automotive industry, 1,500 jobs are at risk," said Cristian Pereira, the president of a union federation which includes workers from all areas of the sector.

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