MNCs keep Venezuela units alive, but barely
Venezuelan auto worker Celso Nunez spends his days moonlighting as a mover and trading salvaged building materials in his worn-out red pick-up. His employer, Ford Motor Co, does not mind. In fact, it is paying him to stay off the job. With Venezuela’s economy in shambles, Ford has furloughed Nunez and 1,200 colleagues at its moribund plant here in Valencia, Venezuela’s third-largest city.
The company said it wants to call them back when times are better.
Nunez hasn’t reported for work in ten months, save for a few days in September to work on a prototype for a new cargo truck.
But he still collects a quarter of his weekly salary of 50,000 bolivars, the equivalent of just $1.70 at the widely used black-market exchange rate. The father of two teenagers counts himself lucky.
“Ford has given me stability... to help my family,” said Nunez, proudly wearing his blue factory shirt after a recent meeting at the plant about the new prototype.
“We know it’s not their fault, it’s the national situation.”
Ford is among roughly multinationals still hanging on Venezuela.
The once-prosperous Opec nation is now in the fourth year of a recession caused by a fall in oil prices and, economists say, failed policies of its socialist government.
A dearth of raw materials and plummeting demand has led many to halt or vastly scale back production, furloughing many employees in a country 150 in where labour laws ban mass layoffs.
A handful of companies, including Clorox, Kimberly-Clark, General Mills, General Motors and Harvest Natural Resources, have given up entirely, abandoning assets or selling them cheap.
Most multinationals, however, say they want to keep at least a minimum presence to be ready for a future upturn in Venezuela, home to the world’s largest proven oil reserves.
In Valencia, retrenchment by multinationals including Fiat Chrysler, Colgate Palmolive, Johnson & Johnson and Nestle SA have rendered the city a near ghost town. Last week, Nestle suspended operations at a baby food plant there, blaming a lack of supplies.
In a statement, Nestle said it continues to pay the plant’s 80 workers and remains committed to Venezuela and about 3,200 employees at other factories there.
At Ford, the company said its Valencia factory had assembled about 400 cars through August of this year, compared with 17,000 units in 2012.
Still, the number 2 US automaker said in an e-mail it “has no plans to leave the country.” The drastically reduced work schedules, it added, is a way to “adapt to the local market’s needs.”
Ford began selling cars in dollars in 2015 so it could buy parts without requesting hard currency via government exchange controls.
Other automakers followed suit, but have not been able to sell many cars because few Venezuelans can afford them.
Venezuela’s car assembly output slumped to 2,849 units in 2016 from a record 172,418 units in 2007, according to auto industry group Cavenez.
Sales, including imports, plunged 3,008 last year from 491,899 in 2007.
At dealerships including Ford, Chrysler and Toyota, Venezuelan-made luxury vehicles sit without buyers, priced as much as $20,000 more than in other countries.
Costs are inflated by imported parts and few economies of scale, analysts said.
To stay afloat in such conditions, Ford and other multinationals have shortened shifts, reduced payrolls and focused on cheaper products, according to unions and company officials.
The cutbacks make for scenes like that at the Fiat Chrysler plant in Valencia, where dust gathers on semi-assembled 2016 Jeep Cherokees, still missing windshields and mirrors.
On a recent day, about 20 employees stood at the entrance to the plant, which sold more than 25,000 units in 2007 but only about 150 this year. About 60 per cent of workers stay home, earning a fraction of their salaries. to