03 Apr 2009 |
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PAN and a troubled automotive industry By Reuben Abati THERE are serious problems with the automotive industry in Nigeria. Nigerian roads are littered with imported second-hand cars, many of them as old as 25 years, as the country is an attractive dumping ground for all kinds of toxic articles from Europe and elsewhere, including cars, spare parts, fake drugs and GM foods. Where new cars are found on Nigerian roads, they are usually foreign imports bought at exorbitant prices and owned by a shrinking minority for whom a brand new car is a status symbol. After-sale, after-purchase maintenance is a critical factor in the life of a car, but in Nigeria today, there are very few mechanics who can change a plug, or a burnt fuse in the highly automated and over-computerised electronic gadgets that are being manufactured by European, Japanese and Korean car plants. The local industry also faces a credit crunch. But nothing signposts the crisis in Nigeria's seemingly now non-existent automotive industry than the reports in the newspapers on Wednesday, April 1, that the Kaduna-based automotive company, Peugeot Automobile Nigeria (PAN) is in danger of collapse. The newspapers reported as follows: "MAN, PAN ask government to save car assembly plant" (The Guardian, April 1, p.8)", "MAN: PAN in Danger of Imminent Collapse" (ThisDay, April 1, p.13); "5,000 jobs under threat at PAN - Production slides to 22 cars daily" (The Nation, April 1, p.1); and "PAN to shut down, sack 5,000", (Vanguard, April 1, p.6. The common thread in all the reports, based on an inspection visit by the President of the Manufacturers Association of Nigeria (MAN) to the PAN factory in Kaduna is that the company, due to lack of government patronage, and the high cost of doing business, is planning to lay off 5,000 of its workers. From a record production of 264 cars per day in the 80s and great strides made in developing local content, and producing/assembling cars fit for Nigerian roads, PAN is down to the production of a mere 22 cars per day. Its production lines are under-utilised, they are deteriorating, the company is in need of government attention. Alhaji Bashir Borodo, the President of MAN, specifically called on Nigerian governments at all levels, to patronize cars produced by PAN, the only automobile firm in the country that is still in business. The problems in Nigeria's automotive industry are however far more complex. What we are dealing with in this industry, is primarily the story of Nigeria: how a country whose private and public institutions once held a lot of promise has become a sorry landscape of aborted dreams and hopes. The story of PAN invariably draws attention to other automobile companies in the country. Anambra Motor Manufacturing Company (ANAMMCO)), once jointly owned by the Nigerian Government and the Mercedes Benz of Germany, South Eastern states, and some Nigerians used to assemble Mercedez Benz trucks, creating jobs for many, but today, the company has since closed shop. By 2008 it could not even pay the retirement benefits of its workers. The Volkswagen of Nigeria (VWoN) was yet another auto company which became a strong symbol of Nigerian industry and enterprise in the 70s. Nigerians embraced Volkswagen models - the unbeatable Volkswagen Beetle, the Igala, LADA and other brands, and like ANAMMCO, Volkswagen provided employment for thousands. Now owned by Barbados Ventures Ltd, following privatization in 2006, VWoN is moribund. It no longer assembles any car; it is reduced to the importation of fully built-up vehicles from Europe and Asia. Thus, effectively, the only auto company that is still involved in the assembly of cars inside Nigeria is Peugeot Automobile Nigeria, also now owned by private investors, with the Federal Government of Nigeria and Peugeot of France owning 11 per cent equity each. Even more than Volkswagen, the Peugeot Brand captured the Nigerian public imagination in the 70s and for many years, it remained the choice car for many Nigerians. It was adopted at a time as the official car for government departments, and among the people, its famous brands - the 404, the 504, the 505, 605 and more recently 406 and 307 were preferred means of transportation, and status symbols. ANAMMCO, Volkswagen and Peugeot have all since been privatised, but long before then, the companies had been in the throes of death, or near-death experience. At its peak, PAN, we have been told produced 264 cars per day. It had on its staff over 1,000 expatriates. It built in the city of Kaduna, a school and a staff club for the benefit of its workers, their families and their friends. The reduction of PAN to the production of 22 cars per day and the sub-text of that, plus the real threat that this only surviving automotive factory, could also close shop, is better appreciated in the context of the crisis of de-industrialisation that Nigeria faces. In the 70s, a policy of industrialization and backward integration resulted in a boom in Nigeria's industrial sector. With favourable economic and production indices in place, Nigeria's manufacturing industry produced many goods - textiles, tyres, cars, food, plywood, newsprint etc. for export and local use. In many industrial estates across the country, a large population of Nigerians were put to work. The country itself worked. But today, the country pays a heavy price in virtually every sector for the failure of leadership and the lack of vision. The MAN President pointed out in the course of his visit that the global automotive industry is troubled. This is true, but the problem in Nigeria predates global economic recession. It is the product of the same lack of strategic thinking that has turned Nigeria into a dumping ground for imports. One after the other, companies in Nigeria are either closing shop or scaling down operations, unutilized capacity in Nigeria's industrial sector is high. Kaduna used to be a thriving centre for textile manufacturing. All the factories have closed down. By the time government offered a N70 billion bail-out package to the textile industry, it was too late. Tyres used to be made in Nigeria. But with Michelin and Dunlop closing down their factories in Nigeria, the local market has since been taken over by imported tyres. Across the country, old factories which provided opportunities for employment have been converted either into warehouses for imported second-hand goods, or places of religious worship. Each time a company in the private sector began to show signs of crisis, government always chose to look the other way. However, to focus on the present example, this is not what governments in other parts of the world do. For example, the crisis in the automotive industry has inspired robust interventions in other countries. The impetus is the link between corporate failure and the national employment index. In the United States, the crisis in the automotive industry affecting the Big Three US carmakers - General Motors, Ford, and Chrysler became an issue for debate in Congress and the design in October 2008, of a bail out package of about $25 billion for General Motors and Chrysler and in recent times, pointed demands that US auto makers should become more creative in order to gain part of a market now dominated by Japanese and Korean cars. In India, the State Bank had to reduce interest rates on loans for car purchase in order to encourage the local industry. In Russia, a protectionist tariff of 30 per cent was placed on imported vehicles. In China, government reduced taxes on automobile purchases. The crisis in Nigeria may go beyond saving just one company or a bank - it is the entire economy that needs to be saved. It is Nigeria itself that is in need of urgent help. The exchange rate needs to be fixed. Power supply must become regular, so regular that manufacturing companies would not have to depend on diesel and generators. And in the short term, efforts can be made to rescue whatever is left of the automotive industry. First, what is required is an assessment of the various automotive plants - ANAMMCO, Volkswagen and Peugeot to find out exactly what they need in terms of funds to be able to operate at a higher capacity. Getting the car assembly plants to work again will generate employment. Second, government should introduce a protectionist policy as in Russia by imposing higher tariffs on the importation of fully built up vehicles, in order to encourage patronage of locally produced cars. For many years, there had been talks and dreams about the making of the Nigerian car. Malaysia has Proton. India has Tata. Where is the Nigerian car? Car manufacturing companies whose brands are on Nigerian streets - Toyota, Honda, Hyundai should be encouraged to set up factories in Nigeria, if they want a share of the Nigerian market. Third, the entire Nigerian economy has to be fixed and the country returned to a season of prosperity. The MAN President says government must buy only Peugeot cars in order to keep the company in business. That is not enough. Ordinary Nigerians ultimately need to be empowered so they can afford to buy goods and services to sustain activity in the Nigerian economy. Up till the early 80s, civil servants including nurses and school teachers could buy brand new cars, fresh from the assembly line. Every college graduate was sure of owning a brand new car within six months of employment. But today, Nigerians buy 25-year old used vehicles imported from Europe and they organise a party to celebrate the achievement. They console themselves by reminding everyone that the Tokunbo car is "Grade A". Americans are rejecting the fuel-guzzling Sports Utility Vehicles (SUVs) produced by American automakers; they are patronizing the more fuel-efficient and cheaper Japanese and Korean cars. But the rejected US SUVs are all over the streets of Nigeria where the ownership of one, is considered a sign of affluence. This cycle of import-dependency and its contradictions is at the heart of the Nigerian economic crisis. Fourth, perhaps a more serious problem in the Nigerian automotive industry is the absence of a crop of skilled Nigerians who can maintain the sophisticated electronic vehicles that are now being produced in keeping with advancements in technology. Nigerian streets are full of road-side mechanics who served their apprenticeship with vehicles made in the 70s. Faced with sophisticated, modern vehicles, they are completely incompetent. Many cars have been ruined. In the garages maintained by car dealers, the bill is often outrageous. Nigeria's education system is not producing engineers and scientists, who can function in a modern society, rather it is churning out graduates who would rather sell cars by the roadsides, or run a pepper-soup joint. The story of Peugeot Automobile Nigeria as reported is a call for leadership and vision. To This end, President Yar'Adua may need a few tutorials from US President Barack Obama.
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