Tuesday, June 24, 2003

Ford hopes SUV craze hits Brazil

By Alan Clendenning
The Associated Press

CAMACARI, Brazil - Just beyond the palm trees lining Avenida Henry Ford, almost 5,000 Brazilian workers at a new plant assemble one pint-sized SUV after another.

The gleaming Ford EcoSports rolling out of the $1.9 billion factory in northeastern Brazil are tiny by U.S. standards and don't even come with a four-wheel drive option yet.

But the world's No. 2 automaker is betting that the vehicle's spunky looks, high driving profile and $13,800 average sticker price will help stem five consecutive years of losses for Ford's South American division.

The continent's notoriously rough roads are tailor-made for SUVs. Coastal and interior dirt roads are full of ruts and potholes. Axle-breaking bumps and dips are common on the paved streets of Sao Paulo, Brazil's largest city.

But the SUV craze never hit South America because most people can't afford larger U.S.-style models that frequently fetch $34,500 or more. That's about the same price as a decent middle-class home in most parts of Brazil, by far the largest car market in South America.

Brazilians and their South American neighbors usually buy small cars and pickup trucks.

Ford is gambling that it can persuade buyers of cars like Toyota Corollas and Honda Civics to consider the EcoSport because it goes for roughly the same price.

"SUVs are beyond the means of most Brazilians, but Ford is offering one at an affordable price," said Joao Leite, owner of the Autoinforme Web site focusing on Brazil's auto industry. "Ford had to do something to ensure their future here, and the EcoSport was a nice surprise."

The company, which ranks fourth in Brazilian auto sales, needs all the help it can get. Ford hasn't posted a profit for its South American division since 1997.

The division's losses peaked at $776 million in 2001 but dropped to $295 million last year.

Ford said the figures show it is turning the corner toward profitability in South America, in part with lower production costs at the Camacari plant 930 miles northeast of Sao Paulo.

Before launching the EcoSport in April, the company last year introduced the subcompact Fiesta designed in Europe. Fiesta sales were largely responsible for boosting the company's Brazilian market share from 7.8 percent in 2001 to 9.9 percent in 2002.

Ford's new vehicle line "contributes revenue, profitability and share growth and brings new customers," said Richard Canny, president of the company's South American unit. "It's really helping rejuvenate the Ford brand."

Some experts are skeptical, saying Ford has been losing money for so long on the continent that there's no cause for optimism until the South American division reports consistent profits.

Ford's performance "raises questions about whether they ought to be in Latin America," said David Healy, an analyst at Burnham Securities in New York. He said it's still unclear whether the new vehicles can help Ford reverse the situation.

Ford said it sold 4,864 EcoSports in April and May in Brazil, making the vehicle the leader in its category and the country's 11th most popular vehicle.

And the EcoSport is getting plenty of hype. The vehicle was named best buy of the year in June's edition of the respected Quatro Rodas (Four Wheels) magazine for Brazilian car buyers and enthusiasts. Argentina's media dubbed it "El Fen█meno Brasileno," or "The Brazilian Phenomenon."

People checking out or buying EcoSports express views like those Americans voiced when Ford's landmark Explorer became popular in the 1990s.

Jose Antonio Ijanc wanted a rugged car to haul materials for his family's interior decorating business and to drive to the beach. His wife, Gabriella, liked the EcoSport because it sits higher than most other Brazilian vehicles, giving her better visibility.

Their 20-year-old son, Mauricio, hopes the EcoSport will help his love life.

Young women haven't been impressed when he cruises around in the family's old car, a stodgy Renault Kangoo looking like a cross between a delivery van and a station wagon.

"The EcoSport is beautiful, and it's cool," Mauricio Ijanc said. "I think it's a car for old people and young people."

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