Detroit Three in Cuba: Close, No Cigar Yet

While American car companies don’t yet appear to be in any hurry to reclaim territory they once ruled with robust style, they are reacting with measured optimism over President Barack Obama’s efforts to normalize Cuban-American relations.

Joseph Szczesny

April 18, 2016

4 Min Read
Tricks to keep old US cars going include using shampoo as brake fluid
Tricks to keep old U.S. cars going include using shampoo as brake fluid.

Cuba’s ancient fleet of cars has fascinated American car buffs for decades and replacing it represents both an opportunity and a blank slate for enterprising automakers.

But while American car companies don’t yet appear to be in any hurry to reclaim territory they once ruled with robust style, they are reacting with measured optimism over President Obama’s efforts to normalize Cuban-American relations.

General Motors, Ford and Fiat Chrysler Automobiles all say they are window shopping a country potentially on the verge of rapid economic development.

“As a global company, we are very encouraged by the increased interaction between the United States and Cuba, and by recent announcements made by both governments,” GM spokesman Tom Henderson says. “We are evaluating possible business opportunities in Cuba, consistent with U.S. law, but have nothing further to announce at this time.”

FCA spokesman Ariel Gavilan says the automaker also is examining prospects in Cuba but does not elaborate. However, both GM and FCA have extensive operations in Brazil, which maintains a bilateral trade relationship with Cuba that potentially could make for easier future entry into the Cuban market.

“While significant sanctions on business with Cuba remain in place, we are evaluating the recent announcements to determine whether any opportunities exist for Ford business in Cuba,” Ford spokeswoman Christin Baker says in an e-mailed statement.

In an intensely competitive industry, global companies always are looking for new markets. According to a recent Boston Consulting Group study,  Cuba’s population of 11.2 million is about one-third of Canada’s, and the country is only 90 miles (145 km) from the U.S. and is expected to support a robust tourist trade within a few years.

However, its residents are poor Per-capita income is probably less than $1,000 per year, which is hardly enough to support a car industry. Moreover, Cuba’s roads are in terrible shape, according to reporters and others who have traveled the island.

But if the history of China since the 1990s and post-Berlin Wall Eastern Europe are any guide, new or newer automobiles will be high on the shopping list of many Cubans, and there should be a big increase in the demand for rental cars, taxis and small commercial vehicles if the post-Cold War experience is any guide.

However, even if sanctions were lifted, the auto market is limited by basic economics. Most Cubans cannot afford such luxuries.

But Detroit’s three automakers also have a history that hovers over Fidel Castro’s island kingdom like an old romance.

Geelys, Ladas, Biscaynes and Edsels

Numbers are hard to come by and U.S. automakers haven't been able to ship cars to Cuba since the Castro-led Communist revolution of 1959. The New York Times estimates as many as 60,000 old cars from the 1950s are rattling around Cuba or tucked away in old agricultural buildings awaiting parts from some defunct machine shop in, say, the Czech Republic.

By one estimate, those 60,000 American cars represent about 10% of Cuba’s total vehicle fleet that includes Russian-made Ladas from as far back as the 1980s and, more recently, Chinese and Korean models.

The new small cars from Geely that can be seen on Cuba roads are a testament to the ambitions of the Chinese auto industry, which is pushing into places such as Russian Siberia, Iran, Brazil and Central America that aren’t prominent on global automakers’ radar.

The Castro regime also has been slow to loosen its grip on the car business. Reuters reports private ownership of new vehicles was allowed in 2012 for the first time in more than a half-century, and more liberalization is expected as U.S.-Cuban ties are restored.

“We have sought ways to increase opportunity for Americans and improve the lives of the Cuban people, including by opening the door to increased travel and commerce between our two countries,” the Obama White House said in a statement distributed during the President’s visit to Cuba in March.

“The President fundamentally believes that the best way to achieve that goal is by facilitating more interaction between the Cuban and American people, including through travel and commercial opportunities and through more access to information. We have great confidence the steps we have taken over the past year will lead to a better future for both the American and Cuban people,” the statement said.

Obama’s visit to Cuba has been criticized by Republicans and by Castro himself. But the criticism of the opening of relations with Cuba is less intense and a broad range of American businesses spearheaded by hotels and airlines is eager to expand into Cuba.

In mid-March the U.S. Treasury Dept. authorized Americans to travel to Cuba provided that, among other things, the traveler engage in a full-time schedule of educational exchange activities that result in meaningful interaction with individuals in Cuba.

The language certainly is broad enough to include car collectors.

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