THE EFFECTS OF RECESSION AND OUTDATED TECHNOLOGIES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

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