Copyright © 1999 Reuters Limited
November 22, 1999
SAO PAULO, Nov 22 (Reuters) - Disillusioned automakers in Brazil say they will throw the brakes on a new line of pollution-busting cars if producers of the eco-friendly ethanol fuel do not reduce rocketing prices.
Automakers say they were roped into reviving Brazil's once-proud fleet of ethanol cars earlier this year, when prices fell to a third of what gasoline costs.
Now they say producers of the sugar cane-based fuel -- called alcohol in Brazil and some other countries -- are getting greedy and hiking prices, again scaring away drivers left stranded at the pump when supply ran out a decade ago.
"The price rise is causing a rejection of alcohol-powered cars," said Jose Carlos Pinheiro Neto, head of the Brazilian Automobile Manufacturers' Association and vice-president of General Motors Corp. in Brazil.
"Our perception is that demand will be falling...and we will have to cut output to match demand," Pinheiro Neto said.
Brazil unveiled the world's first alcohol-powered car after the 1970s oil crisis, tapping its abundant supplies of sugar cane. Demand for the clean-burning cars 15 years ago was huge and alcohol engines drove 90 percent of new auto sales.
But a patchy distribution network and frequent strikes by sugar cane workers caused alcohol to suddenly dry up in 1989, sending prices soaring and leaving cars stalled. By 1997, less than one percent of new cars sold used ethanol.
The alcohol car has since been caught in the middle of a feud between two of the country's most powerful industries: sugar growing and auto manufacturing.
The plunge in demand drowned the sugar cane industry in its own ethanol output while discouraging automakers from revamping old models or expanding production.
BLAME APPORTIONED
And each side blames the other for the alcohol failure.
But last May, the government forged a deal to save one of the nation's proudest inventions and raise annual production to 150,000 cars a year from just 1,200 in 1998.
Automakers have since hiked output to 7,000 cars between January and October. The selling point was rock-bottom ethanol prices, which at the time fell to just 16 centavos (8 U.S. cents) per litre -- not enough to cover distillers' costs.
Pinheiro Neto said GM would launch its first clean-burning
Corsa economy model later this month, while Ford Motor Co. pledged to start a line of ethanol-fuelled mid-size Escorts in
early 2000. Germany's Volkswagen AG But the recent surge in prices -- which peaked above 60
centavos (31 U.S. cents) at pumps -- has drawn harsh words from
the auto industry. The government, trying to salvage the pact,
is abandoning subsidies for the sugar cane fuel and announced
plans to flood the market with excess stocks. Still, plant gate
prices hover around 40 centavos (20 U.S. cents) a litre.
"We don't know what else we can do. If the consumer is not
buying the car, no one can make him. We have no magic tricks
left in our hat," said a senior Development Ministry official.
Alcohol producers say at the end of the day, they may be the
only ones really committed to saving the car.
"This is not about prices, because we're just finally
recovering to normal levels," said Claudio Manesco, a spokesman
at the Cane Agro-industry Union of Sao Paulo.
"What this is really about is automakers were never really
sold on this idea. Look at the dealerships. There's almost no
selection, no new models. How committed are they, really?" Climate Ark users agree to the Full Disclaimer as a condition for use. Viewing and/or downloading of this information on these terms only.
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