Insight: Awaiting better days, multinationals keep Venezuela units alive - barely

By Eyanir Chinea and Corina Pons

VALENCIA, Venezuela (Reuters) - Venezuelan auto worker Celso Nunez spends his days moonlighting as a mover and trading salvaged building materials in his worn-out red pick-up.

His employer, Ford Motor Co, does not mind.

In fact, it is paying him to stay off the job.

With Venezuela's economy in shambles, Ford has furloughed Nunez and 1200 colleagues at its moribund plant here in Valencia, Venezuela's third-largest city. The company said it wants to call them back when times are better.

Nunez hasn't reported for work in ten months, save for a few days in September to work on a prototype for a new cargo truck. But he still collects a quarter of his weekly salary of 50,000 bolivars, the equivalent of just $1.70 at the widely used black-market exchange rate.

 

The father of two teenagers counts himself lucky.

"Ford has given me stability ... to help my family," said Nunez, proudly wearing his blue factory shirt after a recent meeting at the plant about the new prototype.

"We know it's not their fault, it's the national situation."

Ford is among roughly 150 multinationals still hanging on in Venezuela. The once-prosperous OPEC nation is now in the fourth year of a recession caused by a fall in oil prices and, economists say, failed policies of its socialist government.

A dearth of raw materials and plummeting demand has led many to halt or vastly scale back production, furloughing many employees in a country where labor laws ban mass layoffs.

A handful of companies, including Clorox, Kimberly-Clark, General Mills, General Motors and Harvest Natural Resources, have given up entirely, abandoning assets or selling them cheap.

Most multinationals, however, say they want to keep at least a minimum presence to be ready for a future upturn in Venezuela, home to the world's largest proven oil reserves.

In Valencia, retrenchment by multinationals including Fiat Chrysler, Colgate Palmolive, Johnson & Johnson and Nestle SA have rendered the city a near ghost town.

Last week, Nestle suspended operations at a baby food plant there, blaming a lack of supplies. In a statement, Nestle said it continues to pay the plant's 80 workers and remains committed to Venezuela and about 3200 employees at other factories there.

DUST ON SEMI-ASSEMBLED CARS

At Ford, the company said its Valencia factory had assembled about 400 cars through August of this year, compared with 17,000 units in 2012. Still, the No. 2 U.S. automaker said in an e-mail it "has no plans to leave the country."

The drastically reduced work schedules, it added, is a way to "adapt to the local market's needs."

Ford began selling cars in dollars in 2015 so it could buy parts without requesting hard currency via government exchange controls. Other automakers followed suit, but have not been able to sell many cars because few Venezuelans can afford them.

Venezuela's car assembly output slumped to 2,849 units in 2016 from a record 172,418 units in 2007, according to auto industry group Cavenez. Sales, including imports, plunged to 3,008 last year from 491,899 in 2007. At dealerships including Ford, Chrysler and Toyota, Venezuelan-made luxury vehicles sit without buyers, priced as much as $20,000 more than in other countries. Costs are inflated by imported parts and few economies of scale, analysts said.

To stay afloat in such conditions, Ford and other multinationals have shortened shifts, reduced payrolls and focused on cheaper products, according to unions and company officials.

The cutbacks make for scenes like that at the Fiat Chrysler plant in Valencia, where dust gathers on semi-assembled 2016 Jeep Cherokees, still missing windshields and mirrors.

On a recent day, about 20 employees stood at the entrance to the plant, which sold more than 25,000 units in 2007 but only about 150 this year.

About 60 percent of workers stay home, earning a fraction of their salaries. The rest come in but are confined to maintenance and administrative activities, employees and union leaders said.

Despite the tough conditions, Fiat Chrysler has told employees it does not plan to close, said Henry Ospina of the Fiat Chrysler union.

"But there is anxiety," he said.

A Fiat Chrysler spokesman said the company was making "its best efforts to keep production at levels adequate to the availability of inputs and components." The company declined further comment.

"PSEUDO-EMPLOYEES," FREE FOOD

Though many multinational workers said they feel like "pseudo-employees," they fare better than most unemployed Venezuelans, who struggle to buy food and medicine. Payments from state welfare programs lag the triple-digit inflation.

As of April 2016, half of Venezuela's working population was either jobless or employed only in part-time, "informal" jobs, like street vending, according to the last available official statistics.

Compounding the pain, consumer spending slumped by 15 percent last year and is expected to decline by yet another 25 percent this year, according to local consulting group Ecoanalitica.

Venezuelan businesses are enduring their worst moment in decades, with at least two in every 10 factories halted, according to a Conindustria, the country's main industry association.

President Nicolas Maduro's government defends policies, like widely-criticized currency controls, that many businesses say wrecked the economy. He blames the halving of international oil prices since 2014, which slashed Venezuela's revenues.

Maduro also accuses foreign firms of intentionally limiting investment and production as part of an "economic war" waged by political opponents and the United States.

The Information Ministry did not respond to a request for comment.

At some multinationals, furloughed employees are still allowed to eat lunch at cafeterias of halted plants - a big perk at a time of increasing hunger.

Fiat Chrysler serves up staples like chicken, rice, pasta and plantains daily to 60 of its 800 workers. A schedule prioritizes the neediest.

Similar arrangements exist at Colgate-Palmolive and Johnson & Johnson.

"It's one meal I don't have to pay for at home," said Pedro Rodriguez, 44, who has worked just six days this year at Fiat Chrysler, his employer of two decades.

"There are colleagues who only eat half the meals and take the other half home because the situation is tough."

TIRES AS SEVERANCE

To get around strict layoff rules, many multinationals have offered voluntary buyouts. Ford launched a "voluntary separation program" in 2016 that about 800 employees, or 40 percent of its workforce, signed onto. Many use the severance payments to start businesses like bakeries or selling construction materials, workers said.

But many of these ventures are now struggling, too.

At Fiat Chrysler, a severance offer included four new tires, each of which is worth the equivalent of a monthly factory wage in Venezuela. As of August, 23 workers had accepted: some planned to sell their tires and use the proceeds to emigrate.

Elsewhere in Valencia, multinationals have struggled to adapt to other government rules, including strict price controls for some products like milk and soap. The prices rarely keep up with inflation.

For instance, a Colgate-Palmolive soap plant has been shut since February. Workers there said company officials told them it could not cover costs if it sold soap at the mandated price, equal to less than $0.01 per soap bar at the black-market exchange rate.

Colgate-Palmolive in Venezuela did not respond to requests for comment.

Workers said Colgate recently restarted production of price-controlled toothpaste, packaged in brown cardboard. The recycled boxes are cheaper than its usual red packaging.

Earlier, it stopped producing children's flavors and toothpaste with whitener, reducing its portfolio of 300 products to less than a dozen, said union representative Felix Bello. Johnson & Johnson, which once sold everything from mouthwash to moisturizers, now only produces panty liners, a feminine hygiene product. Still, the U.S. drugmaker agreed not to lay off any of its 157 Venezuelan factory employees.

Only three of the factory's seven production lines are in operation, said union representative Jaime Guevara. Workers not on the production line do maintenance work. "Johnson & Johnson has a responsibility to our employees and the communities in which we live and work," a company spokeswoman said.

(Aditional reporting by Tibisay Romero in Valencia; Writing by Brian Ellsworth and Andrew Cawthorne; Editing by Christian Plumb, Marla Dickerson and Paulo Prada)