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THE EFFECTS OF RECESSION AND OUTDATED TECHNOLOGIES

ON THE AUTOMOBILE INDUSTRY OF THE PHILIPPINES


An Emerging Technologies Paper
By Kendrick Chan
Kristine Abesamis
Royce Corral
Australyn Pereyra
Ken_45_11@yahoo.com; pungay16@yahoo.com,
roycecorral@yahoo.com; frozen_ember08@yahoo.com.

ABSTRACT Philippines can’t make its own car? Is it because


of the technologies or the Government? Last one
This paper will tackle about the current issues
concerning the manufacturing industry. This is regarding the latest issues that affects not only
paper will give idea to the readers that the recent in the manufacturing industry but on all industry.
This word has just recently become famous and
manufacturing industry in the Philippines has
many issues which people aren’t aware of. This this is the word recession. Recession affects
almost everything especially the employees. So
paper also contains information base on the
research findings regarding the manufacturing this paper will just generally tackle these issues
and try to dig it dipper and explain it better in
industry. The specific line of product in the
order for readers to understand it correctly.
manufacturing industry that this paper will tackle
about is regarding the car manufacturing industry. 1. INTRODUCTION
When people hear car manufacturing they
automatically give countries they know that World Economy has been significantly slowing
produces cars. These countries are very famous after a year which left factories in closures, people
and are considered to be the first world or the unemployed and a lot of bankruptcies for some
second world countries. That is where the issue companies. It is projected to slow down this year
will come from. The major issue of the car by 0.5% from 3.3% in 2008. This would mean a
industry in the Philippines is that why we can’t major impact on other countries including parts of
produce our own cars and have a brand that is Asia, specifically the Philippines.
made in the Philippines. We all know that The Philippines is dependent now more than ever
Filipinos are very creative and can easily adapt to on exports, foreign capital inflows and
recent technologies. Why is that we can’t produce remittances which are all pivoted on what's
it locally so that the Philippines could have its happening overseas. Since major foreign
own brand of car. Another issue that may support companies closed down and many of these
the first issue is that maybe the Philippines lack companies were also in the Philippines, the
technologies to produce car. Why is it that the drawback primarily is job loss of some Filipino
workers. Also, since there is a lack of funds in the government must have a goal of where it wants
Global credit markets, large companies thought the local auto industry to be in the coming years.
about the idea of expanding locally and held back.
This paper presents these issues about the Car
The Philippines is severely affected by the Manufacturing industry in the Philippines and
worsening crisis. The effect extended up to the how other factors throw an impact on it. It also
industries in the country including the shows in what areas this above issues can be
manufacturing industry. The important address. Recommendations after analysis relating
manufacturing sector lost another 159,000 jobs to these issues will be given.
from the year before. These trends are likely to
continue until next year. Small and medium 2. LITERATURE
enterprises in particular will have a harder time 2.1 The global effects of recession
borrowing with creditors preferring perceived
safer or trusted large borrowers. Due to the decline of the United States economy
during the Bush presidency, a lot of firms were
In this sector, automotive industry is one of the greatly affected by this economic downfall not
biggest. The ABS used in Mercedes-Benz, BMW, only in the United States, but also all over the
and Volvo cars are made in the Philippines. globe. In some countries like United Kingdom,
Toyota and Nissan are other major automakers one of the top selling car manufacturers in the
that make cars in the country. Mitsubishi Motors world, Honda, shut down its manufacturing plant
also have its manufacturing plants in Cainta, in UK, caused by a dramatic decrease in
Rizal. Japanese automobile industries have also automobile sales during the month of September -
manufacturing plants in Batangas, Laguna and in December last 2008. According to Yahoo! Asia in
Bukidnon. These firms have established in the a news article, they stated that automobile sales in
Philippines and ever since the economy down, Japan and North Korea have dropped since the
sales in this area declined. rise of automobile sales during the first 8 months
The downturn in sales was not the only problem of 2008, and was caused by global recession.
these automotive companies or car manufacturers Direct quoted from Yahoo! Asia,
experiences. Aside from the ugly effects of the “[2]In Japan, industry data showed sales of
global economic slowdown, the car industry in the new cars, trucks and buses plunged 32.4
Philippines is far left behind by other percent in February compared to a year
neighbouring ASEAN countries. With ideas like earlier in a sector battered by a steep decline
information technology centers and auto expert in spending, with consumers opting to save
programs, the gap between the Philippines and amid the downturn”
other ASEAN countries is astonishing when it
Manufacturing companies like Honda and Ford
comes to the Car Manufacturing business. This is
cut off employees to regain and to lessen costs.
merely Philippines Government lack support
According to an article in a website called
when it comes to innovating business processes
“libcom.org”, ford plans to axe 7% of its
including this car industry which greatly needs
employees because of the effect of recession to
research and development programs. The
car sales. Also, Nissan motors in UK axed almost
1200 employees during 2008 along with axing throughout the year. Last year during the later
back jobs to reduce costs.[4] months, even though car sales volume has
2.1.1 Its effects to the Philippine economy decreased during that time, CAMPI however,
stated in an article by Elisa Osorio, says that:
2.1.1.1 Unemployment
“[6] The local industry is better off than the
Indicated in a blog entry called “Globalization and American and European markets because
its effects to the Philippines“ by a blogger named growth, albeit small, is still expected”
jbykayaker12, indicated that Philippine’s
manufacturing firms like Toyota, Nissan and ford Even with the effects of recession being clear all
have also resulted to lay-offs to cut costs and to over the globe, local car manufacturing industries
answer the global recession crisis. [2] still remained optimistic in reaching their sales.
CAMPI president, Elizabeth Lee, says that local
Toyota motors Philippines has just implemented a car manufacturing firms may be able to reach
“Monday no production day” to cut off 500 their year-ending sales volume, which will be the
contractual workers and on the job training highest car sales in 11 years.
personnel by March. [2]
Although sales in January dropped from last
Nissan also cut off 40 employees during 2008 and year’s sales, Lee still remained positive and
plans to cut 70 more during the month of optimistic after seeing and noting US and Asia car
February, while Ford only maintains 18 sales during the first month. She stated in an
employees from a sum of 400 before. [2] article provided by carfinder.com,
2.1.1.2Reduction in sales “[2] first month performance is still relatively
According to carfinder.com, there has been a drop better compared to other markets where
of sales during the first month and second month January 2009 sales tumbled 37 percent year
of the year 2009, feeling the pressure of recession on year in the US as China, for the first time
in the Philippines. Statistics (provided by chamber in history, now takes the lead overtaking what
of automobile manufacturers of the Philippines or used to be the largest car market in the
CAMPI) show that sales have dropped by .19% of world”
the January and February sales of February. [1] On the other hand, even though we could say that
Although it is said that mostly people would lay Philippine car sales during this quarter are higher
off costs during the first quarter of the year since compared to the other global competitors, top car
they will save more money because of the manufacturers like Toyota and Isuzu Philippines
expenditures during the Christmas season, people have reported to have a decrease in sales this year.
are still feeling the effects of recession and
economic downfalls globally and in the “We will have flat growth for next year,” says
Philippines. TMP vice president for corporate affairs group
Rommel T. Gutierrez, adding that this will
On the other hand, even though there has been a likewise mark the first time Toyota will fail to
decrease in total sales during the month of post an increase in local sales. For Isuzu, they
January, car manufacturing firms still remain have indicated a decrease in sales this year. Isuzu
positive and very optimistic about their car sales noted their loss from a total of 10000 last year to a
little less than that this year, concluding that the One reason we could say is that the Philippines
global downfall of the economy in the states has does not have enough technology and resources to
an effect to global sales and in local sales here in manufacture its own cars. Although we could
the Philippines. disagree on this since manufacturers like Honda,
Even though the Philippines see the effects of Toyota, and Mitsubishi have their own
recession, it was quite a good that car sales are manufacturing plants here in the Philippines. Even
still on the rise this year and hopefully it would India today auctioned its 2500 dollar electronic
continue. For most people having a car is not car, why can’t the Philippines create its own
anymore a luxury, but a necessity trough living. vehicle? Technology somehow doesn’t solve the
question since the Philippines is technologically
2.2 Japan has Toyota, China has Cherry, how capable enough of manufacturing cars. We can
about the Philippines? note that technology from the other countries is
Toyota motors corporation, Honda, Mitsubishi much better than in the Philippines. But that does
motors’ corporation, has one thing they all have in not mean we cannot develop our own. We could
common, they are all Japanese made. People purchase these technologies in order to perform
know for a fact that Japan holds mostly all of the better in terms of manufacturing but that would
great commercial cars we see every day on the cost a lot to the economy of the Philippines.
streets. In fact we can say that they outrun other 2.2.2Government support
vehicle classes like general motors’ from the
united stated and ford as well, BMW, Mercedes, We can say that the manufacturing industries does
and Volvo from Europe. We should not leave not get enough support from the government
behind the fast growing number of Hyundai and maybe because they have no funds or there has
Kia cars here in the Philippines. And the most been a outgoing number of vehicles here in the
recent competitor, China’s cherry has just entered Philippines that they don’t want to be part of it
the Philippines’ domain. All these manufacturers anymore. Although there have been some plans of
are mostly scattered all over the globe and creating a “Philippine utility vehicle (PhUV)”,
especially here in the Philippines and we see they just need more government support in order
mostly all of our country men purchase Toyota to out-go this plan. The motor vehicle parts
brands, and European brands as well if you’re manufacturers association of the Philippines or
high class. But how come we do not have our own MVPMAP from a news article stated that:
manufacturing firm here in the Philippines? Why “[5]If the government hopes to come up with
can’t we have our own brand of vehicles? an auto industry development program that
Some people will argue that the Philippines do will finally work, it has to look at what our
have its own line of transportation – jeepneys, ASEAN neighbours have been doing.”
pedicabs, and owner-type jeepneys as we call it According to them Thailand was able to be one of
here. But why can’t the Philippines manufacture the top assemblers in Asia, the MVPMAP group
its own brand of vehicle? Call it “beep” or wishes for a more government support to be able
something else. to manufacture its own line of cars[5]. If this will
2.2.1Technology related issues be implemented, it would perform a great impact
to society and globalization, although it seems
quite late since Filipinos are tied up of buying Next, the proponents have also concluded that the
imported cars. Philippines cannot have its own brand of car
On the other hand, globalization and outsourcing because of lack of technology and support from
could also be a reason why we do not have our the government and also the “colonial mentality”
own brand. Since the Philippines is fixed or has of the Filipinos. The Philippines cannot support
the mentality of buying imported cars, the PhUV the idea because it does not have enough funds to
may not be much of a factor to the uprising car make the project; another is that it will cost a lot
sales since mostly all Filipinos would still to purchase technologies that will help
purchase imported products. manufacturing perform better. Also, the
government as of late does not offer the enough
3. CONCLUSIONS AND support it should give in order to have a brand of
RECOMMENDATIONS car although the government could reason out that
3.1 Conclusions we do not have enough funds for a project like
that. Also, we concluded that by the way Filipinos
After studying the causes and effects of the
thinks, they will always think that the foreign
discussed topics above, the proponents have
products are always better. The”colonial
concluded that recession indeed had and still has a
mentality” of the people would greatly affect the
great impact on the way car manufacturing
Philippine car since more people would still
industries produce and sell cars. With the on-
purchase foreign products because for the fact that
going problem of recession, car manufacturing
it is run and tested and people are used to it.
companies are forced to shut down manufacturing
plants from all over the globe just to cut on costs. 3.2 Recommendations
In lieu of closing, car manufacturers also have to The group has also decided that the problems of
cut down employment rates since some are over- recession could not really be solved. People will
crowded and for the same reason of cutting down have to adjust themselves with this global crisis
costs, this not only affects global competitors but and should balance their expenditures as of late.
local manufacturing industries here in the Save money you spend on luxuries and instead
Philippines, axing up to 2000 employees in the spend it on necessities sine those would keep us
Philippines and almost 5000 employees over the alive. Car sales for manufacturing firms would
globe. Recession and economic downfall will still relatively always go up and down depending on
be continuously affecting the car manufacturing which type of season. Offer high discounts and
industry not until the United States can do low down payments maybe would help increase
something about it. Car sales from all over the sales in the future.
globe had reduction of car sales. Locally car sales
went down by .20% from last year’s total and a The group also could recommend that the
total of 37% loss on car sales from the united Philippines not to pursue with the project since it
stated. This indicates a slight advantage over will add costs to the country. The country is in
international competitors since the Philippines just debt and has not enough money to pay those debts
overtook a top selling car country and selling to the World Bank.
better than them. 4. REFERENCE
[1] admin. (2009, february 10). car sales dip
in january. Retrieved march 10, 2009, from
car finder philippines:
http://carfinderphilippines.net/car-sales-
philippines-dip-in-january/

[2]asia, y. (2009, march 2). asian


manufacturing weakens as recession bites.
Retrieved march 12, 2009, from yahoo! asia
news:
http://asia.news.yahoo.com/090302/afp/09030
2081010top.html

[3]jbykayaker12. (2009, january 26).


globalization and its effects to the philippines.
Retrieved march 10, 2009, from
skyscrapercity:
http://www.skyscrapercity.com/showthread.ph
p?t=629890&page=33

[4]libCom. (2009, feb 6). car industry: more


attacks on jobs and pay. Retrieved march 10,
2009, from libcom:
http://libcom.org/news/car-industry-more-
attacks-jobs-pay-06022009

[5]MVPMAP. (2006, march 30). autoparts


makers push benchmarking. Retrieved march
10, 2009, from motor vehicle parts
manufacturing association of the philippines:
http://www.mvpmap.com/

[6]Osorio, B. M. (2008, december 31).


yearender: local auto industry's growth slows
in 2008. Retrieved march 10, 2009, from
philippine star:
http://www.philstar.com/ArticlePrinterFriendl
y.aspx?articleId=428056