Strategic mistakes caused Mercedes to pile up losses in Brazil – 09/07/2022 – Mercado

Strategic mistakes caused Mercedes to pile up losses in Brazil – 09/07/2022 – Mercado


The internal crisis that led Mercedes-Benz to announce the dismissal of 3,600 workers in São Bernardo do Campo (Greater São Paulo) is not going away now. The plant has been accumulating losses for at least 20 years, due to strategies that did not work in Brazil.

Frequent mistakes were not tolerated by the current management of the car company in Germany, which promotes international restructuring.

The problem that is currently affecting the heavy vehicle segment – which is one of the most promising segments in the country – arose when the company decided to produce passenger cars in the domestic market.

The first trial began in April 1999, the month in which the Juiz de Fora (MG) plant was inaugurated. It was possible to collect 70 thousand units of class A per year, but sales did not start. The assembly line stopped in 2005, with production of just 63,000 cars over six years.

The investment – estimated at the time at $820 million (R$4.28 billion) – was never recovered. “Mercedinho” was launched in the middle of the financial crisis.

In addition to the economic downturn, the car was not well received by the public. It was small and, in January 2001, it cost from R$ 33.5 thousand. Meanwhile, the average Honda Civic sedan was sold for R$30,200 in its most basic version. Values ​​are based on the Fipe table.

The mineral division also had a C-Class sedan assembly, but these cars were produced only for the North American market. There was also a CLC coupe, produced for Brazil for a limited time.

After these temporary solutions, the Juiz de Fora factory started assembling trucks. Today, however, only half-finished cabins leave there.

Bad experiences in the past were not enough to make the brand abandon domestic passenger cars. With the Inovar-Auto program (2012-2017), which provided tax incentives to companies that invested in the development of technology and domestic production of cars, the Germans started a new project.

In February 2015, the automaker began construction of a factory in the city of Iracemápolis (in the countryside of São Paulo). The giant, which also owns Toyota and Honda plants, took over the space that ABC had.

Production of the C-Class and GLA models began in March 2016, amid another economic crisis. R$ 600 million were invested.

When it came time to decide on the assembly of new generations of these cars in the country, matrix chose to close the factory in São Paulo. The last units were made at the end of 2020. Today the unit belongs to the Chinese Great Wall Motors.

The problems were not confined to the Brazilian gatherings. In October 2012, Mercedes announced a $170 million (R$887.7 million) investment in Argentina. The goal was to assemble the Vito car at the La Matanza factory, in the capital city of Buenos Aires. The first units were released in 2015.

The model arrived on the Brazilian market, but production ended in February 2019. The amount invested was not available and, once again, the economic crisis and low sales were the reasons revealed by the brand to justify the suspension.

There was another recent loss, this one on a global scale: Mercedes stopped production of the X-Class mid-size pickup in Argentina after the model failed in European markets.

The corporation shared the Spanish assembly line with the Nissan Frontier, which remains one of the best-selling vehicles in the segment worldwide.

Production of the Mercedes Pickup in Europe began in June 2017, but the interruption was announced in May 2020. The brand invested in the modernization of Nissan’s factory in Argentina, but no X-Class came from there.

It is these problems that caused the German car manufacturer to operate in the red in Brazil, with a situation that seems to be more difficult than that of competitors who also produce in the country. There are rivals in the heavy vehicle segment, such as Scania and Volkswagen Caminhões e Ônibus, as well as among luxury car brands, such as Audi and BMW.

But while it is doing poorly domestically, the group is registering international growth. In the last quarter of 2021, the reported profit was 12.7 billion euros (R$ 65.73 billion). Benefits are the positive side of the rehabilitation process.

Since February this year, the company has been renamed Mercedes-Benz Group AG (formerly Daimler Group AG). The truck division was renamed Daimler Truck – an independent company, listed on the Frankfurt Stock Exchange.

In other words, the losses incurred by the passenger car sector will no longer be shared by the heavy vehicle segment. This movement helps to understand what is happening now.

The layoffs in São Bernardo do Campo are part of this restructuring process, which should also lead to the production of electric vehicles. Part of the components will come from third party suppliers.

The restoration of domestic production of passenger cars has become impossible. There was a repositioning of products, which are more expensive and equipped. Today Brazil receives Mercedes cars imported from Germany, Mexico and South Africa.