MADRID - Spanish SUV specialist Santana will make windmill parts to generate cash, but its future as an independent automaker is increasingly fragile.
Santana hopes to keep building SUVs for Suzuki until mid-2008. Its current contract manufacturing deal with Suzuki ends next June.
"We are fighting for survival," said Vincente Martinez, head of marketing for Santana. "But we expect to survive because of our three-part diversification plan."
One project is still secret, but Santana has revealed two others.
It has signed a deal with Spanish power-generating company Gamesa to build towers and other parts for windmills that generate electricity.
The joint venture is 70 percent owned by Gamesa and 30 percent by Santana. Santana will convert 6,500 square meters of its Linares assembly plant to build the windmill components.
Santana also started making parts for railroad and subway passenger car manufacturer CAF of northern Spain.
And Santana is close to a two-year extension of its Jimny SUV contract manufacturing agreement with Suzuki.
"We are negotiating with Santana a new two-year production contract that will start in June 2006," said Koji Tarumoto, president of Suzuki Motor Iberica.
But Santana is unlikely to secure a deal to build a new vehicle for Suzuki after 2008, Tarumoto added. Suzuki will replace the Jimny next year with a new SUV produced at its expanding assembly plant in Hungary.
No long-term deal
"We have no intention to continue construction at Santana after 2008," Tarumoto said. "The Jimny has been an icon for Suzuki, and we are not interested in giving its production to a third party or abandoning it."
The tenuous relationship between Suzuki and Santana has endured since 1995, when the Andalucian government bought the plant from the Japanese automaker, which had planned to close it.
Analysts believe the Gamesa partsmaking deal will reduce losses and preserve jobs in the short term. But it is not enough to make up for the potential loss of its Suzuki contract in 32 months, said Ricardo Conesa, an analyst at consulting company AT Kearney Spain.
"Santana is trying to delay its crisis to 2008," he said.
Santana also produces and sells under its own Santana brand three low-volume vehicles. One is the Anibal, based on the first-generation Land Rover Defender designed in the 1970s. Since last August, Santana builds the Santana 300 and 350 based on the first-generation Suzuki Vitara and redesigned by Italy's Italdesign Giugiaro.
If Suzuki extends Santana production of the softtop version of the Jimny through mid-2008, Suzuki would use it mostly as an entry-level vehicle in central and eastern Europe.
This year Santana will build 4,400 Anibals, 4,000 of the 300 and 6,000 Suzuki Jimnys.
Santana abandoned a bid to build military versions of General Motors's Hummer because the investment was too great to make a profit, Martinez said.
Santana buys diesel engines from PSA/-Peugeot-Citroen for the 300 and 350. Next year, Santana will add a shortened version of the Anibal. Both Anibals and the 300-350 will have Euro 4 compliant engines, Martinez said.
Suzuki lets its national distributors import Santana models if they wish, so Suzuki dealers in Germany, Italy and France sell Santanas.
In Portugal, Santana has a tentative deal with distributor Cimpomovel to sell its cars.
Arthur Little, head of the automotive sector for Spanish consultancy Javier Echeverria, said Santana could do well in some specialty carmaking niche, such as making small electrical vehicles for use at airports and private plants. But it will struggle if it attempts to compete in mainstream segments, he said.
"Santana's future within the car industry is obscure," Little said.
Non-auto manufacturing deals like CAF and Gamesa that diversify activities and ensure jobs are the primary goal of the Andalucian government, Little believes.
"I really think this is the correct decision, but it is not sufficiently visionary and ambitious," he said. "They probably need a stronger strategic plan."