Reallocation of CARS incentives sought

Published October 20, 2020, 5:30 AM

by Bernie Cahiles-Magkilat

To benefit laid off auto workers

A group of automotive workers has asked the government to reallocate a portion of the multi-billion worth of tax perks granted to participants in the tax incentive-driven Comprehensive Automotive Resurgence Strategy (CARS) Program as part of social amelioration program for laid off automotive employees.

Philippine Metalworkers’ Alliance (PMA) National President Ruel Punzalan said that Mitsubishi Motors Philippines Corp. (MMPC), one of the two CARS Program participants, the other being Toyota Motor Philippines Corp., has been laying off workers since 2018.

In a statement, the PMA said that MMPC had already terminated 400 workers in 2018 even as the company enjoyed the subsidy under the CARS program. According to Punzalan, the Japanese-owned company is implementing another wave of termination effective November 9. Some 100 workers have already notified last Oct. 16 of their impending retrenchments.

“What’s the point of giving incentives to automotive manufacturers when they will lay-off workers anyway,” said Punzalan in a statement.

Under the CARS Program, created under the auspices of EO 182, government will support the CARS Program participants to the tune of P9 billion each, in exchange for “new investments in Body Shell Assembly and Large Plastic Parts Assemblies,” production of “no lower than two hundred thousand (200,000) vehicles” with “impact on the parts manufacturing industry and linkages, jobs generation, and overall consumer welfare.”

PMA has urged that these displaced workers should be paid their monthly salary from the tax perks that MMPC would be getting from the CARS program. If these workers are receiving say P30,000 a monthly, they will be paid that same amount until such that they are rehired. Punzalan said that MMPC has promised to rehire the laid off workers after six months.

The labor union has already met with Trade and Industry Secretary Ramon M. Lopez, who took note of their proposal.

“To start repairing the injustice, allocating a portion of the budget for the CARS Program to provide social amelioration to those already displaced would be a good start,” Punzalan said.

Thus, the PMA urges the government to carefully consider the employment implications of granting reprieve to CARS beneficiaries. Otherwise, granting such reprieve will only incentivize car manufacturers to pursue mass termination of workers, encourage reliance on imports, and defeat the objectives of making domestic car production competitive.

PMA, which is composed of 5,000 direct workers in the automotive, electronics, steel and iron sectors, even noted that layoff in the industry continued even as the demand for vehicles gradually recover.

“It is more likely, however, that such move will be followed by increase in imports of completely built units. Enrollees in the CARS program will certainly not meet their production targets on time when they continue to rely on imports than expand local production. This clearly goes against the objectives of the CARS program,” said Punzalan.

“While the economy is currently in a crisis, this alone should not be the basis for granting reprieve to companies under the CARS program,” Punzalan said.

The PMA would like to remind the government that one of the purposes of the CARS program is employment generation. Unless the government wants to subsidize job loss especially under the current economic crisis, then there is no point giving in to the pressure from corporate interest to extend the grace period under the CARS program.

While it is true that car sales declined during the ECQ period, PMA cited recent reports that showed vehicle sales on the recovery mode.

According to PSA MISSI, losses in terms of volume of sales started to fall in June 2020 at 35.3 percent from 60.2 percent in May 2020. Volume of sales loss declined further in August 2020 at 15.5 percent.

Similarly, lost value of sales has also declined. Sales value loss peaked at 87.9 percent in April and declined since then. By August, loss fell to 24.5 percent which suggests that the automotive sector is gradually recovering.

There has been signs of recovery in terms of transport equipment production. In April 2020, production declined by 84 percent. By August, lost volume of production fell to 43.5 percent. Production will need to catch up soon as demand for vehicles return early next year.

At the Laging Handa Virtual Press Conference, Secretary Lopez said the retrenchment of industry workers is connected with the huge decline in the car industry. “The social amelioration program, perhaps, we can discuss out it. We can propose it to the government so we can address the planned lay off,” he said.

But he explained that the CARS Program objective has remained the same which is to revive the local automotive industry and for its recover. The automotive sector already started to decline last year and the pandemic this year has badly impacted car production in the country.