Dick Nerod, 62, General Motors vice president and president of its activities in Latin America, Africa and the Middle East, had an impressive winning streak.
Starting in 1972, he headed a variety of GM overseas operations in Thailand, Venezuela, Spain, Brazil and Mexico. And for 26 years, those operations produced profits and sales-volume increases.
But last year's economic crisis in South America ended Nerod's streak. His domain lost $64 million during the third quarter of 1998. It continues to lose money this year, but not as much.
'After 26 years, I had my first one. It's not a very pleasant experience,' he says with a grin. 'We're working real hard to turn this one around.'
In a wide-ranging interview with Automotive News Staff Reporter Joe Miller, Nerod spells out GM's challenge in South America.
Has Latin America seen the light at the end of the tunnel yet?
The decline has bottomed out. The recovery is a little later than we had originally anticipated. But we expect next year will be better than this year in terms of volume.
How has GM Latin America weathered the past two years?
We have significant cost controls to help us withstand the downturns. In the Andean countries, sales are down 52 percent the last two years. (But) all the units have dug in, done the things necessary, and we're not losing money in that area. I think part of that is the focus on cost.
Another thing we try very hard to do is watch our cash and debt position, which you have to watch in countries that have such high interest rates, high inflation, etc.
(The managing directors) in country after country have done a very good job of controlling those variables, so when you have an upturn, you're able to make hay. And when you have a downturn, you're able to respond and pull your belt in quickly.
How have your dealers weathered this?
It's been a real challenge for them, with margin compression, etc. Overall, they are coming through this thing. But it takes its toll, as you can imagine, when the industry goes down 35 percent. (And) there are more players in the marketplace than ever before.
How is the the Blue Macaw vehicle assembly plant progressing? (The plant, in Brazil, will produce a low-priced version of the Corsa.)
It's coming along. It will be inaugurated in the middle of next year. Because of the crisis, we've had to defer a lot of capital expenditures, and we sort of stretched out the timing.
What are the trends in South America? Which segments are booming, and which have tapered off?
What's happened the last several years has been a continued shift toward the lower-priced vehicles. Part of that reflects what's happened with purchasing power. And there have been a lot of new entrants in those areas. So there's been a definite shift toward the lower-priced segment. That's where most of the growth has been. There has been a shift to more four- and five-door vehicles where formerly there had been a lot of three-doors.
Have the sales of smaller vehicles actually increased for GM, or are they flat while everything else is down?
The whole market had gone down 35 percent, including those (small-vehicle) segments. In fact, when things get tough, those segments often are affected as much as anything because those are more marginal buyers, and their purchasing power often goes down quite a bit.
What vehicles are Latin American consumers clamoring for? Is there anything that has really surprised you?
Most of our new entries have been very well received around the circuit. We brought in the new Chevrolet Astra last year. That went very well. We brought in some products from Suzuki that also sell as Chevys down there. They've done extremely well. The Chevrolet Blazer and the S10 pickup sell very well. Most of the products we brought in have been well received.
What's sort of encouraging is, despite all the crazy liquidations that have been going on in the marketplace, we've been able to hold our share. Which is not trivial considering the fact that there has been a lot of backlog in the industry because of the decline. In fact, my total region (including Africa and the Middle East) actually is up in share.
Is the GMT800, GM's new full-sized truck, on sale in South America yet?
Only in Venezuela (where it is assembled) so far. We'll be introducing it in other countries in the future, but Venezuela is the first place we've brought it into.
How is the market for full-sized pickups?
Again, the market has shifted more toward mid-sized pickups. But in countries such as Venezuela, which is a low-fuel-price country - fuel costs about 50 cents per gallon - there's still a preference for full-sized vehicles. In the past, there used to be an even larger market for them. Fuel prices are a big determinant.
How is the competition changing in South America?
First of all, there's more. The growth in the market plus reduced barriers to entry have resulted in a lot more competition in almost every market. Some of the markets are almost completely wide open, which means everyone in the world is there. So you have a lot more competitors, very good competitors.
Some of them are feeling the pain of having come in just when the market began to slip. But in the major markets, they are in there with investments and are going to stay there.
Has the crisis weeded anyone out?
Hopefully, it just weakened some of them. The people who may have announced things that hadn't started may have deferred activity, but most of those who had plans in progress are continuing.
Have the market leaders changed?
Let's say it's compressed. Again, reflecting more products and more capacity.
We're No. 1 in the whole Andean area, and we have been for the last 15 years. And we're No. 1 in trucks for the whole region. We had not been strongly represented in small cars, where all this growth has been, so we were sort of capacity constrained.
When the Latin American automotive market goes up, will you be ready for it?
We think so. But again, other people are well positioned. Volks-wagen and Fiat are very strong competitors and will continue to be strong competitors.
Are there any product launches you're looking forward to?
In the Middle East, we've been launching the Caprice and the Lumina from Australia, which have taken off very well. That market requires a lot of vehicles of that size. In South Africa, we launched the Astra, and it looks like the same kind of success it's been in other markets. In most of the other markets, we have either variants or supplements to our lineup that will be coming in 2000. A new small car is coming to Brazil during the second half of next year.
Are there any segments you are not addressing?
We're looking down the road to see how we can get into some of those segments. Some of them we may decide to play in, some not. For example, a small van. We're not in that yet in any significant way.
How about the Opel Zafira (minivan)? Can you bring that across the ocean?
Well, you wouldn't bring it built up (already assembled) because of the high cost. So you have to see other ways.
What is the potential of Africa?
I'd say there is more potential in the Middle East. Africa has pockets, but over the years, it hasn't grown very much because of a lot of serious economic and political problems. Obviously, you have a significant population but not a wide degree of motorization. In the markets of any size, we have a presence. But I don't think you'll see the rate of growth you saw in Latin America. The disposable income is not at those levels yet.