The impact of Inovar-Auto on industrial employment and the closure of the Ford plant in São Bernardo do Campo, Brazil

Publication Type:

Conference Paper

Source:

Gerpisa colloquium, Paris (2020)

Keywords:

Brazil; Ford; Inovar Auto

Abstract:

The purpose of this paper is to look into the situation of the Brazilian automobile industry based on the Inovar-Auto Programme which was unveiled in 2012, during the presidency of Dilma Rousseff, and which closed in 2017 during the Michel Temer administration. More specifically, the purpose here is that of discussing the incapacity shown by this programme, unable to prevent defensive restructuring currently under way in the Brazilian automobile industry and the headcount reduction in auto companies. The case we shall use in this report shall be the former Ford plant in the city of São Bernardo do Campo, near São Paulo, one of the only Ford plants dedicated to the production of trucks and lorries, and which closed in 2019.
The main hypothesis that has been sustained in this report lies in the fact that the Inovar-Auto project in particular has been a subterfuge used by the main players in this sector, to make sure of tax breaks and other benefits, but without having shown significant progress in terms of generation, or even maintenance, of employment, especially in the industrial units (both new and old) that were set up in different parts of the country, and also the companies located in the immediate surroundings, which operated as local suppliers. The case of Ford, which received a reduction of 2 percentage points in the rate of Industrialised Products Tax (IPI), for having achieved an 18.8% improvement in energy efficiency, but which, even so, decided to close their plant in São Bernardo do Campo, clearly shows this lack of synchronism between incentives and the increase of jobs in this segment.
The announcement of the plant closure calls one’s attention as it happened immediately after the termination of the Inovar-Auto programme. The launch of this programme was like a lifeline for Brazilian automotive companies, especially those (Ford, General Motors, Volkswagen and Fiat) that jointly accounted for approximately 70% of the national market (COMIN, 2006), who were optimistic about another package of protective measures. There was also the expectation that the incentives offered through this programme would boost the scale of production in Brazil exponentially, as the prediction was that new companies would be attracted, encouraging those companies as already established to construct or expand their plants. This wave of investments, in theory, could even reverse the negative inflection that had been mentioned by Comin (2006), on saying that the 2000s consolidated the trend that had taken root as from 1987, the last year to have shown a strong similarity between curves of employment and of production in the Brazilian automotive industry.
For the work paper as here proposed, we used data from the National Association of Producers of Automotive Vehicles (ANFAVEA) and also data from the Brazilian Ministry for Labour and Jobs (MTE) through the Annual List of Social Indicators (RAIS/MTE) and the General Register of Employed and Unwaged People (CAGED). The first of these considers the period from the first to the last year of the Inovar-Auto programme, while the others focus on the following months. The combination of the data from both sources is justified as the automotive sector is extremely formalised, and then there is the practical reason based on availability, as the most recent RAIS data were those of 2017. The RAIS would be more useful for the period of the Inovar-Auto, while CAGED shall help with the analysis of the following period, shedding light on the closure of the Ford plant in São Bernardo do Campo.
The data shows that, in São Bernardo do Campo, in the first year of the Inovar-Auto programme, particularly in the sector of production of cars, trucks, and utility vehicles, there was an increase in the number of people employed. However, this figure was unable to sustain itself, and started to decline at the end of the period being analysed. The figures for the production of lorries and buses showed slower progress in the year of 2012, starting the downward trend that would show already in 2013.
The data about percentage variation compared with 2012 in the city of São Bernardo do Campo show that only management positions were spared, when the headcount reduction in the region was implemented. It is also interesting to see that the same group that had shown the greatest loss of income was the only group that managed to increase its workforce by 9.8%. In contrast, University level professionals were the hardest hit, with job losses of 17.1%, while the employees working on the production lines, that maintained their salary stability, lost 16.6% of the total number of jobs. In all, the municipality of São Bernardo do Campo lost 14.0% of all jobs, strongly influenced by the greater contingent of unwaged people, which is that very group, the group working in production activities.
The formal announcement of the closure of the Ford plant in São Bernardo do Campo, due to “restructuring of the local business”, caused the loss of 2.8 thousand jobs, with the company’s industrial activities at the plant finally coming to an end in October 2019, having a cascade effect on jobs in other companies of the region, especially those who were active in one of the three levels of the supply chain. This impact on the whole chain cannot yet be appraised, but it is possible that this could be relevant, as a result from the tendencies introduced by Inovar-Auto, the most important of these being the national and local production of components.
According to Sturgeon, Chagas and Barnes (2017) and Lima (2018), the companies whose industrial activities were already consolidated in Brazil, as was the case of Ford, were given many required conditions as requisites to take part in Inovar-Auto, these being investment in research and development; increased energy efficiency; and, most significantly, a minimum percentage of manufacture activities in the country, a figure that would vary based on the type of vehicle produced and also the period (2013 to 2017). The main goals of the Brazilian Government were those of nationalising the production of components as much as possible, and also to preserve (or increase) jobs in the value chain in this segment in Brazil. However, the Ford case shows that the bargaining power of car manufacturers increased inversely proportional to their impact in terms of generation of jobs and local development, a trend already shown by recent analyses such as those by Torres and Cário (2013) and Dulci (2015). This presents, to the institutional apparatus, a challenge that is that of being active in the configuration of industry and of having an influence upon the model of governance of the chain (Herrigel, Wittke, 2005). It is in this regard that Inovar-Auto should have been able to prevent the closure of the Ford plant and the elimination of thousands of jobs.

Video

GIS Gerpisa / gerpisa.org
61 avenue du Président Wilson - 94230 CACHAN
+33(0)1 47 40 59 50

Copyright© Gerpisa
Concéption Tommaso Pardi
Administration Géry Deffontaines

Powered by Drupal, an open source content management system