Peso rise may force battery manufacturer out of business

Posted at 08/18/12 11:09 AM

MANILA, Philippines - Oriental & Motolite Marketing Corp., manufacturer of vehicle batteries, warned that it may close its plant in the country if the peso continues to appreciate and cut its export earnings.

Speaking at a forum organized by multisectoral group Competitive Currency Forum yesterday, Oriental & Motolite president Don Albert Cuesta said that as 55 percent of the firm’s output is shipped overseas and at least 54 percent of input is sourced locally, a sudden appreciation of the peso against the dollar would hurt their business.

“I don’t want to belittle the Philippines but it is a very small market. We are exporting 54 percent of our products so if we lost 54 percent of sales, then that means we have to close shop,” he said.

He noted that all other things being equal, a P2 appreciation against the dollar threatens to erode five percent of their export revenue translating to a 33 percent reduction of export earnings.

A P2 appreciation of the peso would translate to the firm earning only P33 for every P100 that they used to make.

He also said that if they were planning to invest in a new state of the art battery assembly line that would have given a 20 percent investment rate of return when the exchange rate was P43, that same rate of return would only be one percent given the current exchange rate.

“We do not know for how long and how far this currency situation will go. But it can certainly come to a point where we will be attracted to invest in manufacturing abroad and retiring our Filipino workers or simply do trading,” he said.