Hugo Chavez Threatens to Close Toyota Plant in Venezuela

By Brendan Moore

12.26.2009

Hugo Chavez at lecternHugo Chavez, president of Venezuela, has hurled invective against Toyota this week, saying that the company’s plant in Venezuela doesn’t make enough four-wheel drive vehicles for Venezuelans, doesn’t transfer technology to Venezuela, and furthermore, Chavez is threatening to oust the Japanese car company from the country if these changes are not made soon.

Chavez also angrily railed against the other Asian and American auto companies producing cars in Venezuela regarding their operations, stating, “We’re not interested in these traditional companies that have been here 50 years or more, they’ve never transferred technology. I suggest they gather their things and go, and we’ll bring in the Russians, Belarusians and Chinese who want to make cars here.”

In addition to Toyota, Japan’s Mitsubishi, Korea’s Hyundai and America’s Ford and General Motors have production facilities or assembly plants in Venezuela, whose citizens love cars, particularly thirsty ones. The retail cost of gasoline in heavily subsidized by the government, and is currently around 19 cents (USD) a gallon.

In fact, gasoline is so cheap that a soft drink is 20 times the cost of gasoline on a per-liter basis. An espresso at one of the cafes is 30 times more. Customers that buy gasoline at a station usually leave more in tips for the attendant that pumps the gasoline than they pay for the gasoline itself. It is estimated that the Venezuelan government gives away more than $3000 a year to every driver in the country in the form of gasoline subsides.

It seems that the catalyst for Chavez’s tirade was a report from a regional vehicle transporter that stated that there was a shortage of AWD vehicles available to people in areas of the country where there is limited road infrastructure. The areas with few roads are also the areas that are among the poorest in Venezuela, and an AWD vehicle (typically a small, tough pickup) is the only sensible means of daily transportation. The transporter’s remarks focused specifically on a Toyota model named the Land Cruiser 70, which the company had stopped producing in 2007.

This news apparently inflamed Chavez’s populist side, and he immediately ordered his Minister of Trade, Eduardo Saman, to conduct “a severe and thorough inspection” of Toyota and its business operations in the country.

“You tell the people at Toyota that they have to produce this model and we are going to impose a quota, and if they don’t meet it, we will punish them,” he informed Saman, and additionally commenting ominously that the state would not hesitate to expropriate Toyota’s facilities and pay appropriate compensation.

Toyota logo-smallToyota executives seem to be caught off-guard by Chavez’s bellicose outburst; indeed, they seem perplexed. They state that they informed the Venezuelan government of the cessation of production of the vehicle in question years ago, and subsequently applied for a permit to import the same vehicle from a neighboring country, so that it could continue to be sold in Venezuela. The company has never received approval to import the vehicle, nor has it been denied permission to import the vehicle.

Toyota has a single plant in Venezuela that came on line in 1981 and builds several models including the Corolla compact and HiLux compact truck, company spokesman Hideaki Homma said. The factory produced about 13,000 vehicles in 2008, and employed around 1900 workers as of March 1, 2009. Production in 2009 dropped considerably due to the contraction of the regional economy.

The last decade of Chavez’s rule in Venezuela has seen nationalization of large parts of the country’s economy, including oil and power utilities, as part of the Socialist’s drive to make the country into a model nation per his “21st century revolution” efforts, but he has left the auto industry alone for the most part. These new developments could be mere political rhetoric designed to play to his political base, or, could portend a takeover of the automobile manufacturing sector.

COPYRIGHT Autosavant – All Rights Reserved

Author: Brendan Moore

Brendan Moore is a Principal Consultant with Cedar Point Consulting , a management consulting practice based in the Washington, DC area. He also manages Autosavant Consulting, a separate practice within Cedar Point Consulting. where he advises businesses connected to the auto industry. Cedar Point Consulting can be found at http://www.cedarpointconsulting.com.

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8 Comments

  1. The petty little tyrant raises his voice and stamps his feet again.

  2. Venezuela has the highest inflation rate of any industrialized nation in the world, and the economy has been in shambles lately as the petrodollar income has dried up. I think Chavez is just making noise, trying to focus some anger on a foreign company.

  3. I’d leave. Let ’em drive chinese stuff…maybe the people will drive him out.

  4. Good one, bno.

    Any nation forced to drive Chinese cars will soon overthrow the government that put that hardship upon them.

  5. I don’think any of the auto producers in Venezuela make anything there except variations of their tried-and-true models, so it’s not like technology transfer gets them anything that hasn’t already been copied by someone else (like the Chinese or the Russians).

  6. What kind of gas guzzlers are popular in Venezuela?

  7. Big trucks and big S.U.V.s are popular there among those that have the money to buy them.

  8. Someone give little Hugito a candy bar and stop him from crying.

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