Auto industry quite bullish

Several executives listed the reasons for their optimism at the annual general meeting of the National Association of Automotive Component and Allied Manufacturers, (NAACAM) held at the Johannesburg International Motor Show (JIMS).

Barlow Manilal, CEO of the Automotive Industry Development Centre said while South Africa's manufacturers certainly experienced turbulent times, performance remained the local industry's best protector. Manilal took the long view, advised manufacturers not to panic, predicting that the international economic storm would pass within 18 months.

Impact on exports

Nico Vermeulen, Director for the National Association of Automobile Manufacturers in SA (NAAMSA), took a more bullish view, saying the current difficult times were likely to continue for the next six to nine months, with the domestic market starting to improve from the second quarter of 2009.

“The global economic crisis is likely to have some impact on the demand for export vehicles, but based on the expected growth in emerging markets and taking into account that we export vehicles to over 70 markets, our risk is well diversified.

“We therefore expect relatively modest volume declines of 10% to 15%, which still projects a very respectable tally of 240,000 vehicles exported in 2009,” said Vermeulen.

On the local market Vermeulen believed South Africa's inflation and interest cycles were close to peaking, with interest rates coming down in the second quarter of 2009.

Collaborating as SA (Pty) Ltd

Roger Pitot, executive director of NAACAM, advised local manufacturers to collaborate to survive during and prosper after the prevailing tough conditions.

“I believe now more than ever that we need to collaborate as SA (Pty) Ltd, even working with multinationals on a local front,” said Pitot.

He said suppliers' success depended on collaboration at all levels: with the original equipment manufacturers; with all tiers of government and NGOs, like the AIDC, the SPDC, the IDZs, and the IDC; with unions and labour force; and with the providers of logistics, finance, and power.

Pitot added that such collaboration should have as its aim a more prosperous South Africa (Pty) Ltd: “I really believe that without collaboration our future is bleak. Manufacturers may go into further decline and we will become, as Clem Sunter puts it, a second division nation.”

'Parts Inform'

Malcolm Perry, MD for Federal Mogul After Market SA, announced the formation of just such a collaborative body at Federal Mogul's annual fund-raiser, held in Kyalami.

Perry said an informal association of manufacturers which has been educating end-users under the “Parts Inform” umbrella would combine its resources to create a formal Automotive After Market Manufacturing Association, with training and supply chain efficiencies its main areas of focus.

“We have to do things differently to grow during 2009, we have to focus on manufacturing and distribution, with training and upliftment our main investment.

“The industry is still battling to find engineers and fitters and turners. The association will therefore focus on training new technicians to meet the skills shortage, pooling its skills, facilities and knowledge to ensure trainees receive the best accredited training in the market,” said Perry.

Apart from training, the new association would continue to educate end-users about original brands, but would now also extend its efforts to lobby government and liaise with manufacturers on manufacturing standards to promote efficiencies in the supply chain through co-operation,” said Perry.

Benefits for parts suppliers

Perry is also bullish about 2009, especially as a drop in new vehicle sales locally always benefits parts suppliers. He warned, however, that much needed rationalisation of the automotive parts supply chain would cut margins, with distributors to suffer most and even retailers to feel the pinch.

“I expect parts revenue to grow by 9% in 2009, which includes real growth of some 2% and the balance based on inflation. The declining rand however bodes well for the local manufacturers. Our clients can now restock and the weaker currency has already helped us to be fairly successful in attracting foreign investment at our plants in Port Elizabeth, from where we export mainly heat shields, and in Pinetown, where we make bearings.

Perry predicted that interest rates should ease to 12.5%, in time for the elections during the first quarter, with inflation stabilising at between 8% and 10%.

“Even if South Africa's economy grows at only 4.5% during 2009 we will still have a very competitive economy,” Perry said.