Venezuelan President Hugo Chávez, beset by a recession that is hurting his popularity, has turned his sights on international car companies, threatening them with nationalization and pledging to ramp up government intervention in their local businesses.
The populist leader has threatened to expropriate Toyota Motor Corp.'s local assembly plant if the Japanese car maker doesn't produce more vehicles designed for rural areas and transfer new technologies and manufacturing methods to its local unit. He said other car companies were also guilty of not transferring enough technology, mentioning Fiat SpA of Italy, which controls Chrysler Group LLC, and General Motors Co.
Venezuela's President Hugo Chávez, shown here at an event in Caracas, this week threatened international car companies with nationalization, charging they are failing to transfer enough new technologies to local units.
The president ordered his trade minister, Eduardo Saman, to inspect the Toyota plant. He said if the inspection shows Toyota isn't producing what he thinks it should and isn't transferring technology, the government may consider taking over its plant and have a Chinese company operate it.
"We'll take it, we'll expropriate it, we'll pay them what it is worth and immediately call on the Chinese," Mr. Chávez said in a televised address late Wednesday.
Mr. Chávez, a former army officer who has been in power longer than a decade, has nationalized dozens of foreign-owned companies—and sometimes entire sectors of the economy, including electricity firms, cement companies, coffee companies and oil-services firms.
A Toyota spokesman in Tokyo said the company is checking with the Japanese embassy in Venezuela, the Venezuelan embassy in Japan, and Japan's foreign ministry to determine the president's exact intentions. The company hasn't decided yet how or whether it will take any steps, the spokesman said.
GM and Fiat officials couldn't be reached for comment.
Mr. Chávez's verbal attacks on the Japanese firm are likely motivated by politics and stem from Venezuela's quirky auto market, analysts said. Many Venezuelan consumers are angry about a shortage of new cars for sale—partly due to Mr. Chávez's own unorthodox economic policies.
While Mr. Chávez's comments suggest that his government will intervene more heavily in the local car industry in a bid to boost the supply of cars for sale, some analysts downplayed the president's threats to resort to nationalization—a move unlikely to solve the underlying problems.
"Something could happen [in terms of nationalization], but I'd give it a low probability," said Robert Bottome, publisher of Veneconomia, a leading Venezuelan business newsletter. Mr. Bottome said he thought Mr. Chávez was trying to score political points by criticizing the car makers amid a deep recession that has seen the president's approval ratings fall below the key 50% mark.
Any move to nationalize would have little impact on Toyota's bottom line. The company's Venezuelan operations are the smallest of the four Latin American markets where it produces cars, and the Venezuelan market has dropped sharply in the past year, while other markets in the region, such as Argentina, Brazil and Mexico, have either held steady or grown despite the global recession.
Toyota produced about 13,000 vehicles in Venezuela last year, and sold roughly 30,000 for a market share of 11%, lower than the Japanese car maker's share in the U.S. Globally, Toyota sold nearly nine million vehicles in 2008.
Venezuela's auto sector is pushed and pulled by a series of countervailing influences that have left many customers frustrated and showroom floors empty. Demand for new cars is high, even amid a recession, because heavily subsidized gas is so cheap—about $0.07 a gallon. But supply of new cars is low because strict government currency controls make it difficult for companies to get the dollars needed for parts to make the cars.
Supply is also hamstrung by enduring labor problems. Firing workers is nearly impossible in Venezuela, and many employees want their companies nationalized so they can become government workers with the perks and job security that come with that status.
Toyota ran into labor problems earlier this year that led the company in March to take out an advertisement in a local newspaper warning that it may not remain here much longer. "For the first time in 51 years of uninterrupted work in Venezuela, the presence of Toyota de Venezuela C.A. in the country is seriously threatened," the company said in an ad in the El Nacional daily.
In May, a Toyota union leader was shot dead. He had led a month-long strike last year that paralyzed the Toyota plant in the eastern city of Cumana. In September, prosecutors brought a murder charge against a man accused of killing the union leader, but gave no indication of a motive.
Whether Mr. Chávez moves to nationalize outright, he indicated his government would turn up the pressure on car companies. He said his government is going to apply strict quotas regarding the number and types of vehicles auto makers can produce.
The nature of the Venezuelan car market may make it unlikely that Mr. Chávez gets what he wants, particularly regarding the transfer of technology.
A senior Toyota executive said that Venezuela's auto market is "too small for us to be able to fully localize production and transfer technology in a meaningful way." Because of the limited sales volume and the country's high duties on imported cars, the executive said, most global auto makers bring partially assembled cars into Venezuela and put them together in a process known as knock-down assembly.
Venezuela also lacks a mature supply base of components. Given all those factors, it's "very difficult—virtually impossible—not just for Toyota but for any global auto maker to transfer technology," the Toyota executive said—though the official wasn't ruling out an effort by the auto company to try and accommodate Caracas.
As for Mr. Chávez's demand for Toyota to produce more low-priced vehicles designed for rural areas, the Toyota executive said the cheapest vehicle a global auto maker such as Toyota could produce today is still too expensive for most regular consumers in the emerging world.
That said, the executive said Toyota is gearing up to unveil a non-frills car aimed at emerging markets, referring to the car Toyota calls "New Compact Car." The car is due for a launch in India in late 2010 and in Brazil a year after. Toyota has no plans to launch that car in Venezuela, but a no-frills car like the NCC would be more affordable and might be the car Mr. Chávez is demanding, he said.
Toyota's annual report says it has 90% of voting rights in its Venezuelan business. It isn't clear who controls the remaining 10%. Toyota's assembly plant in Venezuela has more than 2,000 workers, and has been in the country for more than 50 years.
(excerpted from the Wall Street Journal)
By DAN MOLINSKI and NORIHIKO SHIROUZ
—Alison Tudor, Yoshio Takahashi and Jóse de Córdoba contributed to this article.
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