Brazil needs more industrial hubs, says Stellantis Group CEO

At the end of April, Antonio Filosa dedicated an entire day of his schedule to Agrishow, a fair held in Ribeirão Preto (São Paulo countryside). The president of the Stellantis group in South America said that agribusiness represents 20% of everything the company makes in the country.

The account made by the executive includes, for example, the vehicles used by veterinarians in livestock care and the R$500,000 RAM pickup trucks that are a status symbol in deep Brazil. The company also represents the Citroën, Fiat, Jeep and Peugeot brands in Brazil.

But the prosperity of the countryside is not enough for the survival of the national automotive industry. The Italian Filosa seeks to lead a movement of business decentralization, with the creation of new industrial centers beyond the Southeast.

In an interview with Sheetthe Italian executive also talks about future launches —Stellantis will invest in ethanol combined with electricity— and what he expects from Brazil after the elections.

While the automotive industry projects growth, sales this year have yet to take off and parts supply remains problematic. What is expected for the second half? There was a view of the technical bottleneck, which was the capacity of semiconductor manufacturers, and a solution was expected in the second half of the year. But new facts emerged, such as the war, unfortunately, and the new wave of Covid-19 in Shanghai. Improvement will happen, I am optimistic and I see signs in the medium term and for 2023. But these new facts were not on anyone’s radar.

For the Stellantis group, which brings together many brands, is it easier or more difficult to deal with the shortage of components? The difficulty is the same for everyone, it’s not a matter of having many brands. The biggest problem is in the supply of semiconductors. Investments to double or even triple the production capacity of these items have already been approved and are being implemented. We have some delays, which I think are manageable, arising from the humanitarian crisis due to the war and the health crisis that stopped Shanghai and other Chinese ports, but nothing that is structural.

But wasn’t there learning that it would be important for the industry to locate more component production in South America? There are initiatives in this direction. The more localized it is, the better for the automotive industry and for the country, and I’m not just talking about semiconductors. Brazil needs a strong industry and, as far as possible, decentralized.

I’m almost a miner, and miners say that all eggs can’t be in one basket. Attracting investments in Brazilian territory, that is the first concern. The second is to find possibilities for decentralization. A rich country is one that has an investment portfolio that takes care of installing itself in several places, this generates poles.

The industrial complex of Goiana (PE) is an example of this. Exactly. We brought the industrial park from Pernambuco, the road network improved. Of course, it didn’t get to the point we wanted, but we can already see a leap. There was an improvement in the levels of education and health, a reduction in crime.

This location is a duty of the industry, and the government, together with this industry, should work on attracting productive investments and on the possibility of decentralizing them.

Do you miss an industrialization policy in Brazil? Anfavea always mentions that there should be an “Industry Plan” like there is, for example, the Safra Plan. I think we have, on the side of the Ministry of Economy led by Paulo Guedes, a very productive interface. I believe that, with all the difficulties we’ve had in recent years, with the pandemic, economic crisis and inflation, the government has worked well in agribusiness and has started to enter the industrial sector.

At the worst moment of the pandemic, the main problem for all of us was the fixed cost, because the factories were closed, but we continued to pay the employees, the energy bill, the property security bill. There were two ways out: either to send a bunch of people away or to reach a four-way solution, companies and government. Then there was Provisional Measure 936, which helped us face the heavy burden of the sector, hoping for better times.

But the step that must be taken is to create conditions for the industry to be competitive at all times. Improving infrastructure and tax reform are essential for this to happen.

For me, industrial policy should, more than anything else, aim to regain competitiveness. Nobody likes to invest in an economy where the tax burden deteriorates 50%, 60% of its direct possibilities. We don’t, but many have doubts about investing in a country with dimensions as large as Brazil’s and with such low infrastructure. Because it’s the infrastructure that makes you get anywhere.

And if there is the possibility of improving access to different regions, you gain negotiation power and obtain incentives, right? And purchasing power. Today the automobile market is 66% Southeast. The question is: do people in the North and Northeast have less desire to buy a car? Not. But has less access to purchase.

If you increase income, you increase the demand not only for automobiles, but for anything that is not basic. The decentralization of the automotive industry carries broad value chains, with many suppliers, and job qualification, with higher wages.

What is lacking in Brazil is this structural equality, to ensure that the GDP reaches people and territories more equally.

In the recent past, the automotive industry came to think that globalization was the only way. But today we see that it is important to have products aimed at local markets. How does the Stellantis group see this moment? Brazil has a chance that no other country has, perhaps with the exception of India and the United States: betting its chips on different solutions. Back then, and I’m talking about 100 years ago, the volumes of the automobile industry were 6 or 7 million cars a year in the world. With such a reduced scale, there wasn’t as much choice for powertrain technology. Fossil combustion was chosen, with petroleum derivatives.

We are now in a post-Covid phase, but even if this industry will have between 90 million and 100 million cars in the world, it would be crazy to limit such a huge scale to a single propulsion option. Will electrification succeed worldwide? Of course it will. Will it succeed in Brazil? Of course it will. But is it the only option? Not.

What Brazil has is ethanol. From planting to wheel, the decarbonization equation is very similar to that of electric vehicles. And the big advantage is being at all gas stations. It is a very competitive solution because it costs little. In an electric car, the cost of batteries can cost the vehicle up to 15,000 euros [R$ 79 mil].

For Brazil, the moves are electrification, which will expand its volumes, ethanol and also the combination of this ethanol with electric motors, with the location of these technologies. It is a virtuous cycle that the country can face.

You are talking about a hybrid ethanol system. And would it be just ethanol? I think it’s perfect, but we would also have the 100% electric, the plug-in hybrid [que pode ser recarregado na tomada].

When would the ethanol hybrid arrive? We need to localize these technologies, so we’re talking about a cycle that could start around 2025. It’s necessary to negotiate investments with shareholders.

The industry always needs to work thinking about future steps, but we are in an election year, which should be fierce. Has Stellantis already started conversations with candidates? No, we have representatives at Anfavea, which is now undergoing a change of mandate, from Luiz Carlos Moraes to our colleague Márcio de Lima Leite.

Does the fact that the new president of the entity is from Stellantis make it any easier? It’s always easier for us to have coffee together (laughs). But no, Márcio is a jurist, he knows very well what the institutional role is and what the corporate role is.

Regardless of who will be elected, what do you expect from the next presidential term? I think there are a lot of good things that have been accomplished amidst a tsunami of difficulties in the last four years by both political power and the power of private companies. The next government, whether the current one or a different one, should look at the industry as a chance to attract more investment, bring in qualified and decentralized development, which, for me, should almost be a mantra.

If everyone correctly complains about social inequality between the country’s territories, what is the remedy? You certainly cannot maintain the distribution of income forever. It’s a good palliative, you can follow the country’s history for decades, but what will remain is industry and agribusiness, is production. And the broader the value chain that investment is attracting, the better.

If the next government puts [esses pontos] as priorities, the country has much to gain.

Is Stellantis preparing a new investment cycle in the country? We already have a forecast to approve with our shareholders for the next four or five years. We will have 16 new products, and seven will be hybrid or electric. It’s a plan that goes through a series of approvals, and everyone looks at Brazil with optimism.

X-RAY

Antonio Filosa, 48

President of the Stellantis group in South America, he graduated from the Polytechnic Institute of Milan and joined the Fiat group in 1999, where he worked in areas such as manufacturing, purchasing and marketing in different countries.