BELIEVING IN THE PH CAR INDUSTRY’S FUTURE

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Ferdinand Raquelsantos stands beside the restored 1949 Ford Custom four-door, the same car his father owned during his younger days.

Ferdinand Raquelsantos stands beside the restored 1949 Ford Custom four-door, the same car his father owned during his younger days.

Anybody having an official meeting with Ferdinand Raquelsantos will most likely end up having three calling cards from him. The catch is two of those calling cards have back-to-back information about him, which means you are actually getting five calling cards from him.

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One calling card, however, can stand out, because it shows he is the president of the Philippine Parts Makers Association Inc. (PPMA), the organization of car parts makers in the Philippines that worked with the Department of Trade and Industry in helping craft the Comprehensive Automotive Resurgence Strategy (CARS) Program.

Two of his calling cards show he is part of the domestic vehicle industry, being the president of PhUV Inc., a manufacturer of electric jeepneys, and also the president of AutoFIR Enterprises, a supplier of automotive seatbelts.

It should come as no surprise that Raquelsantos is in the vehicle industry and has headed PPMA for at least four years, because his experience with the car parts industry in the country spans about 26 years. His being a bike and car enthusiast also fuels his passion to be part of the domestic vehicle industry.

“Actually, I started about 26 years ago in the auto industry.

First, I was the production manager for Dai-ichi speakers and spent about three years with them. And then I moved to Sanden air-conditioning, I spent about five years with the company,” Raquelsantos said.

In 1998, a headhunter looking for a managing director for Sweden-based Autoliv contacted Raquelsantos and he accepted the job offer. He added Autoliv, which has manufacturing facilities in countries where there is vehicle assembly, accounted for 65 percent of the worldwide market share for seatbelts and 40 percent for airbags.

But the local automotive industry, particularly the assembly of vehicles in the country, began to slow down that eventually prompted Autoliv to stop its manufacturing activities in the Philippines.

“With the slowdown of the auto industry that they foresaw somewhere in 2004, they decided to pull out and scheduled it in 2008,” Raquelsantos said.

Establishing his own company
Since the Philippine unit of Autoliv supplied all the vehicle assemblers in the country before it pulled out, he decided to continue supplying seatbelts under a new company called AutoFIR of which the last three letters stand for his name.

“When they pulled out, there was a continuing obligation of a parts maker to an [vehicle]assembler,” he said.

“Autoliv had no choice but to assign a company here that will take care of that, and basically that’s when all of a sudden I decided I might as well take over the business.

And that’s why we named it AutoFIR. FIR is Ferdinand Imperial Raquelsantos,” Raquelsantos added.

AutoFIR functioned as a logistics center to supply parts to local car makers with seatbelts imported from other countries, and also locally assemble seatbelts for certain low-volume vehicles manufactured in the Philippines.

Although a seatbelt assembly many not look complex compared to other car parts, Raquelsantos said there is a need to make sure each assembly or design works perfectly. A seatbelt keeps a passenger fastened to his or her seat that helps prevent severe injuries and even death during a mishap.

“So of course, so a lot of testing is required, etc. which is done during the research and development stage,” he added. Under tests simulating a crash, a seatbelt assembly is tested at 45 kilometers per hour to make sure it will work in saving a passenger from injuries.

As PPMA president
Although Raquelsantos keeps himself busy with AutoFIR, PhUV and his other businesses that includes an enterprise offering solar energy solutions, his heading PPMA has also taken up a significant part of his energy and passion even if it doesn’t pay him a single centavo. The reason: he still believes the Philippine vehicle manufacturing sector can grow and export parts to other countries even if the percentage of vehicles assembled in the country has declined during the past years.

“Right now, car sales are growing but the thing is the CKD [completely knocked down]percentage is going down. If I’m not mistaken for last year, CKD or local assembly was only 34 percent of the overall auto sales, whereas before it was the other way around: it’s 80 percent CKD and 20 percent CBU [completely built-up units],” he said.

Vehicle sales in 2014 reached about 270,000 units and expected to reach approximately 300,000 units this year.

“It [decline in local manufacturing of vehicles]started in 2000 when imported second-hand vehicle sales started,” Raquelsantos added.

The second-hand imported vehicles originated from Clark in Pampanga, Subic in Zambales and Port Irene in Cagayan. But the importation has since stopped after the Supreme Court in January 2013 ruled that Executive Order No. 156 banning importation of used vehicles issued by then President Gloria Arroyo in December 2002 was legal and constitutional.

Others factors that caused a reduction in the number of vehicles assembled in the Philippines are free trade agreements that reduced tariffs on some imported vehicles, and the lack of economies of scale to manufacture vehicles in the country.

“Because of all these free trade agreements and everything, importing CBUs or completely built-up units is competitive to the locally assembled vehicles. Generally, if we compare like, let’s say Thailand and the Philippines, there’s about $1,800 difference [in cost per vehicle assembled]. So it is more expensive to produce in the Philippines than in Thailand. Why? Because of the volume. They’re [Thailand] producing something like 1.9 million vehicles per year. While us, the record shows there was 88,000 [vehicle assembled]last 2014,” Raquelsantos said.

However, he has not lost hope the local vehicle industry can increase the number of units assembled and even export cars parts, now that the CARS Program and its implementing rules and regulations are in place.

“The CARS Program is actually what we have been lobbying for. We worked for it for almost three years now,” Raquelsantos added.

Under the CARS Program, a local car assembler may apply for fiscal support by locally assembling vehicle models at P9 billion per model, with a commitment to produce 200,000 units for each model during its six-year model life.

With the CARS Program, Raquelsantos sees the number of locally assembled vehicles increasing by 100,000 units per year, which will more than double the 88,000 units assembled in 2014. This will eventually result to more people working in the local automotive industry.

“Right now, the [local vehicle]industry is covered by 70,000 employees, that includes the assemblers. Again with this [CARS Program], we can easily say that there will be a 50-percent increase as far as manpower is concerned,” he added.

And with the CARS Program requiring vehicle models covered by incentives to have a high local content, Raquelsantos believes parts makers in the Philippines can eventually become exporters of car parts.

“My analysis on that is really, it [car parts maker]has to be endorsed by the car assemblers themselves. So let’s say, I supply seatbelts to Toyota [Philippines], then Toyota can endorse me to North America to supply seat belts there. So it has to be something like that, the way I see it,” he said.

Raquelsantos added there are a good number of companies that export car parts like Asian Transmission Corporation and Toyota Autoparts Philippines Inc. that are among the major producers of transmissions in the Southeast Asian region. Then there’s Yazaki-Torres Manufacturing Inc. that ships much of its automotive wire harness production abroad.

But what he also wants to happen is small and medium enterprises that are part of PPMA, which comprise more than 90 percent of the organization’s membership, will also benefit from the CARS Program.

Raquelsantos said the program has injected life into the organization.

“At least they see some program coming on and the interest is there. I believe that starting this year, the association is going to be very vibrant because we have again to represent the parts makers with all the activities with the assemblers,” he added.

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