Carmakers around Turkey have been casting envious eyes in the direction of France, which is putting six billion euros ($7.7 billion) on the table to supports its auto industry, and the US, where Chrysler and General Motors are due more than $17 billion in state aid between them. One senior executive in Bursa recently said, “The Turkish government seems to be saying: ‘crisis? What crisis?’ We need a version of the support the French and Americans are giving and we need it now.”
Such state support has been under discussion for months, with a decision first promised in December. When it does arrive, it is likely in some respects to be better than the French deal, which involves the promise of soft loans and loan guarantees. The Ankara version will probably come as cash gifts to the whole manufacturing industry, Or as one analyst put it, outright bribery not to sack the workforce.
Finance Minister Kemal Unakitan, of course, was more diplomatic, preferring to label the handouts as ‘employment aid’. The number of people officially out of work has risen to double digits, standing at around 11 percent overall, although it is higher in urban areas, perhaps more than 12 percent. And that will affect the popularity of the ruling AKP as it prepares to contest the municipal elections in March. The party is polling less than half the 47 percent support that saw it romp home in the parliamentary elections of July 2006.
A tank too empty to fill
Also last month, Unakitan tantalizingly held out the prospect of extra and special help for the car industry, without explaining what form it might take. Automakers have been the engine of Turkey’s manufacturing industry, driving the export figures ever upwards as the AKP has brought years of prosperity since it came to power at the beginning of the decade. However, according to a report in the Zaman newspaper, the new aid may not be that special. The Turkish government’s measures will be designed to boost domestic demand, said the paper. If that is true, it could help in lessening the local “feel bad” factor and it could induce a few extra votes for the party in March but it is unlikely to have much effect on an industry that depends heavily on exports.
Zafer Ça layan, another minister, who wields the industry portfolio, said 80 percent of the car industry’s sales come from abroad, with the vast majority from the European Union. Last month, exports of motor vehicles slumped by more than two-thirds. According to the Automotive Manufacturers’ Association (OSD), the whole industry was working at just 44.7 percent capacity in December. That depressing figure was down by more than a third on the previous month. Income from car exports between January 1 and January 15 brought in $251 million this year. Last year’s figure for the same period was $819 million. No amount of incentives to the Turkish population to buy cars will make up for that kind of loss.
The practical and immediate effect on the ground has been for several car plants to close down for short periods. After all, there is no point in making ever more cars to add to the unsold stocks. Ford Otosan, Oyak Renault, Tofafl and Fiat manufacturers, announced 12-day cuts in production for January and some are said to be already planning similar moves for February. Anadolu Isuzu, a joint venture between the Japanese automakers Isuzu and the Anadolu Group, which makes commercial vehicles, suspended production in mid-January until February 16. Toyota Turkiye Otomotiv Sanayi sent its 3,500 workers home for two weeks in December on paid leave, as well as 1,500 people employed in its spare parts subsidiary Toyota Boshoku. The practice has spread to companies dependent on the auto industry, like steel cords maker Celikord, tire maker Brisa and parts producer Bosch Sanayi ve Ticaret.
For Ford Otosam, the 10-day break last month at its Kocaeli and Inonu factories was its fourth suspension of production since October. It has also laid off 350 of its 8,500 strong workforce. The grim news for Ford Otosan didn’t stop there. The company has 18 percent of its shares listed on the Istanbul Stock Exchange, with Koc Holding and the Ford Motor Company holding the rest equally. Fitch Ratings has announced it would no longer provide ratings or analytical coverage of the company and signed off by issuing a default rating with negative outlook. That may be understandable, although it is a little like someone removing the car jack while the owner is changing a flat tire.
Peter Grimsditch is Executive’s Turkey correspondent
