SÃO CAETANO DO SUL, Brazil General Motors Co (GM.N), frustrated with years of slipping market share in Brazil, is overhauling half its lineup in order to grow faster than its rapidly multiplying rivals, a senior country executive told Reuters in an interview.
After watching its market share slip for nearly a decade as its lineup grew stale, GM launched seven new models in Brazil over the past year, with two more due this year.
"Our sales forecasts were wrong for all of the recent launches. Each model sold more than we expected," senior vice president Marcos Munhoz said. Sales of the new offerings have outpaced forecasts by up to 70 percent, he said, putting the company on track to outgrow rivals.
His remarks underscore the carmaker's eagerness to reverse the impact of an economic slowdown and rising loan defaults that have weighed on auto sales. If GM expands its Brazilian market share from last year's 17.4 percent, it would be the first time since 2003, when its market share peaked at 23.3 percent.
Rising imports and new local factories have made the market immensely more competitive since 1990, when GM was one of just four carmakers selling in Brazil. The number of brands available has multiplied by more than ten since then.
The domestic auto market is shaking off a weak first half, Munhoz said, waving aside an industry group's forecast that car sales could drop this year for the first time since 2003.
"I disagree with that forecast," he said in his office at GM's headquarters in the city of São Caetano do Sul. "I think the market has all the conditions to grow ... 1 percent to 1.5 percent this year."
Dealership group Fenabrave cut its 2012 sales forecast on Tuesday to a 0.4 percent drop, from the prior forecast of 3.5 percent growth. Brazil's car and light truck sales last fell in 2003 and have averaged double-digit growth since.
Munhoz said rising auto loan defaults, which weighed on the industry in the first half of the year, would soon begin to fall and steep government tax breaks have already kicked demand into high gear since late May.
EASIER TO MOVE UPMARKET
The carmaker's newest offerings in Brazil have been concentrated in larger and more premium segments, Munhoz said, acknowledging that competition is fiercer for the entry-level compact cars that make up the bulk of the market.
"The less added value in a segment, the harder it is to differentiate yourself," he said.
Brazilians are also finding it easier to move upmarket with new purchases as interest rates fall to record lows in the country, cutting the monthly premium on a bigger car, he added.
GM's overhaul of its lineup is making waves with unions, as it trims jobs at older production lines.
The company has cut about 2,000 jobs from two factories in Sao Paulo state since April 2011 and could shut down a 1,500-person assembly line in Sao Jose dos Campos, according to a metalworkers union there.
The union is threatening strikes, factory occupations and demonstrations at dealerships if GM does not rule out more cuts.
Munhoz said GM's overall payroll in Brazil is growing as it offsets cuts at some factories with hiring at others, such as a plant in the southern state of Rio Grande do Sul.
He added that jobs in Sao Jose dos Campos would depend on demand for models produced there, including older parts of the Chevrolet lineup such as the Meriva and Zafira.
"It depends what the market does. If people stop buying those models, we have a problem," Munhoz said.
(Editing by Guillermo Parra-Bernal and Dale Hudson)