Ayala eyes major automotive investment

AYALA Corp. head for corporate strategy Paolo Borromeo, Orbeta and Finance Secretary Cesar Purisima

Ayala Corp. is preparing to be a bigger player in local automotive manufacturing, ready to pour billions of pesos in an industry long dwarfed by peers in the region but henceforth seen to benefit from rising consumer affluence and new sweeteners offered by the government’s comprehensive automotive resurgence strategy (CARS) program.

In a recent interview with the Inquirer, Ayala managing director and group head of corporate strategy and development Paolo Maximo Borromeo said the conglomerate was in talks with potential partners in the automotive industry and might find tangible opportunities “within two to three months.”

“We are exploring different manufacturing partnerships. We’re looking at it at not just for vehicle manufacturing but also for auto parts and auto components,” Borromeo said.

Each manufacturing deal might require an investment by the conglomerate of more than P1 billion, he said, adding that the group was open to multiple deals.

The plan is for Ayala to scale up opportunities in automotive manufacturing—an industry which is both capital- and labor-intensive—to build on the businesses that it has today.

Ayala’s electronic manufacturing services (EMS) arm Integrated Micro-Electronics Inc., which is based in Laguna, has become the second-biggest EMS provider for the global automotive industry based on 2014 revenues, global market research New Venture Research said. Of the Ayala group’s 40,000 global headcount, IMI is the biggest employer with 15,000 people.

“We also realize that our only big manufacturer now (in the group) is IMI but today it’s more of an automotive electronics manufacturing company,” Borromeo said.

Apart from IMI, Ayala also has car dealerships under multiple brands—Isuzu, Honda and Volkswagen. It owns 15 percent each in the car assembly/manufacturing operations of both Honda and Isuzu in the country.

Borromeo said that while Ayala’s participation in the local car industry was currently small, this could be scaled up. Ayala is interested to expand its interest if either Honda or Isuzu would expand its local manufacturing operations but Borromeo said these Japanese manufacturers also had other factories in neighboring countries like Thailand and Indonesia.

“So we’d rather think of what else can we bring in,” Borromeo said, adding that Ayala had previously wooed Volkswagen to put up a local plant but this did not push through.

Apart from the option of bringing car brands to manufacture locally, Borromeo said Ayala’s participation could also be in the domestic manufacturing of auto parts, noting these were also covered by the CARS program.

Borromeo cited Indonesia’s biggest conglomerate PT Astra International—deemed by many as the barometer of the Indonesian economy—as a good example. “It’s like an automotive conglomerate and is not just into dealership. It has auto parts and auto manufacturing,” he said. –Doris Dumlao-Abadilla