Protectionism Hurts GM's Business
Attention pro-protectionists: Protectionism creates problems for one of your most favorite companies. GM wants to bring its new Chevrolet Trax SUVlet to Brazil, but Brazil is giving GM a hard time, says Reuters.
GM started production of the Trax in Mexico this month, with firm plans of shipping the Trax to Brazil. However, Brazil, the country lauded by pro-protectionists for its newly sealed borders and high taxes on imports, reneged on a free trade agreement with Mexico. Result: The small SUV market in Brazil goes to Ford (EcoSport), Renault (Duster), and Suzuki (Jimny). Honda said it would bring a small SUV to Brazil in 2014, and Volkswagen unveiled a mini SUV concept, the Taigun, The compact SUV segment is one of the fastest-growing niches in the world’s fourth-largest auto market, but GM has no product.
In the meantime, the Trax will be sold in more than 140 markets, but not in Brazil yet. There are rumors of an expensive imported Trax, followed by a locally produced one, but Carlos Barba, head of GM design in Brazil, did not want to confirm this to Reuters.
“We are working on that. We have a plan. We’ll get there, but I cannot tell you the dates.”
It’s about time GM get’s its act together in that segment. “These guys are riding the wave for 10 years and we’re just looking at it,” Barba said. Protectionism can be a bitch if you sit on the wrong side of the fence.
GM has been operating plants in Brazil since the 30s. This "crisis" can be resolved by shifting or adding plant capacity in Brazil. Increased capacity would mean more jobs for the locals. I'm pretty sure that's exactly what the Brazilian government wants, and there will be Brazilians who will be grateful for the jobs and added economic activity. The loser here may be Mexico, as they presumably now have a little bit of excess capacity as a result of the tariffs.
Re: Protectionism I feel qualified to opine because I was a happy steelworker until I wasn't anymore. American workers and probably some elsewhere were given a 50 year cocoon during which our unchallengeably prosperous countries shielded us from economic realities like competition and risk. That only served to retard our moral and intellectual development. Instead of acquiring more education and personal finance skills we bought things and piled up debt. We came to believe that this situation was a birthright. Then the situation changed and we got really pissed off. Collectively we're just a rich kid whose old man went broke. Now we have to deal for real with the whole effing rest of the world. Well, we're all older now so this sucks even more. And we've let our kids go lax regarding education and personal responsibility so they're going to be duds in the new reality. I don't know how protectionism will excuse us from the consequences of our own profligacy. Business is not charity, it must chase profits. If we workers had bothered to chase anything besides shiny toys and awesome cookouts back in the day, we might have been investors instead of insolvent today.
Brazil's protectionist stance is largely attributed to their dislike for our agricultural protectionism, including farm subsidies and price controls. Tit for tat. I totally agree with the statement that protectionism is hurting GM in this case, but the situation is more complex than Brazil being the bad actor.