MNCs seen rationalizing their global operations

Published February 26, 2020, 12:00 AM

by manilabulletin_admin


Trade and Industry Secretary Ramon M. Lopez said the global economic slowdown and the serious threat of COVID-19 could lead to further rationalization of multinational corporations’ (MNCs) operations.

Lopez saw this trend following the closure by Honda of some of its production facilities in various countries, including the Philippines as it rationalizes operation for efficient allocation and distribution of global resources. Wells Fargo has also announced to reduce its IT business in the country.

“Look at the world. We are a small player, a small country compared to the global world demand. So, you can expect a lot of this rationalization if your global headquarters are the ones handling the allocation of resources,” Lopez said. He said that big markets must be an important factor for an MNC when rationalizing global operation to optimize efficient resource allocation to stay competitive.

But Lopez qualified that it does not necessarily mean the Philippines would experience more rationalization impact from global companies operating here.

He said that very sensitive companies would be affected from the global economic slowdown.

It depends if they are no longer competitive in a market segment they are in, he said.

Companies would really maintain production hubs where they are cost competitive.

For instance, he said, the closure by Honda of its Philippine manufacturing facility next month is largely affected by the competitiveness factor in the passenger car segment.

Honda is not competitive in the passenger car segment in the Philippines, but it is the country’s biggest motorcycle producer here.

Companies whose products fit the market segments in the country may not be affected by the global rationalization.

Honda is also a smaller player in the local auto industry. It assembles two models BR-V and City but of small volume. Its pricing strategy is also higher.

He noted that the global economic slowdown that started in China because of US-China trade war should have been on its tail-end had it not for the COVID-19 outbreak.

“It is reaction to world market forces,” he said.

The closure of Honda Cars Philippines Inc. (HCPI) plant will displace 387 factory workers and 1,200 employees of its 37 local autoparts suppliers.
The local suppliers of HCPI have already estimated P240 million in total loss from inventory supply.

Meantime, Wells Fargo & Co., an IT company, is transferring a portion only of their activity to India.

The US-based bank Wells Fargo & Co. would leave only 50 tech workers out of 750 by the end of the year.

Philippine Economic Zone Authority (PEZA) Director General Charito B. Plaza has confirmed that such transfer consists pf only one out of their total 200 business lines operating in the Philippines. The locator company assured PEZA that their move to transfer IT/technical BPO services to India is a decision they implemented in all its sites or also in other countries. Notwithstanding, Wells Fargo & Co. other departments employing more than three thousand Filipino employees will continue their operations in the Philippines, she said.