If there's one country where global automakers are drawing their lines in the sand both longer and deeper than any other, it's Brazil. Not only have imports been driving into the market in greater numbers in recent years, but also foreign carmakers increasingly are inaugurating new plants, bringing other new investments along and quickly transforming Brazil into a manufacturing laboratory for innovative automotive technology.

As Latin America's largest country, with an automotive industry that expects to see new car sales this year hit 1.5 million or better, Brazil also is at the crossroads of present and future international trade pacts that could further establish it as a global strategic cog. Already in place is the Mercosur provisional free-trade pact that besides Brazil includes Argentina, Paraguay and Uruguay as full members and Bolivia and Chile as associate members.

There also is the promise of a customs union between Brazil and Mexico, plus the Free Trade Agreement for the Americas that the U.S. would like to see passed by 2005. As the largest member of Mercosur, Brazil prefers to strengthen that trading bloc and consolidate it with the Andean Pact, which includes Bolivia, Colombia, Ecuador, Peru and Venezuela, before entering an agreement with the North American free-trade community.

That said, a preliminary deal signed this spring between Brazil and Mexico allows each country to import up to 40,000 vehicles with an 8% tariff, compared to the 35% tariff Brazil traditionally charges on Mexican-made vehicles and the 20% Mexico levies on Brazilian makes. The move takes on increasing importance as Brazil's annual vehicle exports gain momentum, forecast this year to be worth $4 billion, or 12% more than exported in 1999.

Brazil's domestic carmakers consist of the long-established "Big Four" - General Motors Corp., Ford Motor Co., Volkswagen AG and Fiat SpA. Relative newcomers include DaimlerChrysler AG, Toyota Motor Corp., Honda Motor Co. Ltd., Renault SA and PSA Peugeot- Citroen. Money continues to flow. Renault alliance partner Nissan Motor Co. Ltd. is investing $90 million to produce its Frontier pickup at two Renault plants, with a goal of 50,000 sales annually.

Mercedes-Benz will build 45,000 commercial vehicles and 25,000 A-Class cars this year, and spend an additional $40 million to produce the new C-Class at its new plant in Juiz de Fora, with production to begin in January. Ford is completing construction of its new Amazon small-car plant in Bahia, and Toyota will add the Yaris at its factory in Indaiatuba.

VW currently holds a 30.4% share of Brazil's total car market, of which hatchbacks and their variants dominate. Fiat has 26.9%; GM 24.3%; and Ford 7.2%. A study of new-car buyers last year showed that Brazilians have a 48% loyalty to their car brand on the whole, with GM averaging 48%, while Volkswagen totals 52%.

However, Jose Carlos Pinheiro Neto, president of the Brazilian automakers' association, Anfavea, expects VW's market share to fall to 23% in five years, while the new manufacturers will increase their share to 20% in the same period due to increased competition. Already Peugeot's 206 is the top-selling hatchback in the 1.6L category, edging out the VW Gol. The segment includes the Fiat Palio, Renault Clio, GM Corsa and Ford Fiesta.

Brazil's proliferation of automakers also is drawing top global suppliers and encouraging methods of innovative manufacturing that emphasize lean production and just-in-time delivery, plus greater financial commitment and responsibility on the part of suppliers. VW's commercial truck plant in Resende, for example, allows suppliers to attach their modules built up in the factory to vehicles on the assembly line.

GM's new Gravatai plant, which produces the Celta subcompact, is part of an industrial campus where 16 Tier 1 suppliers have invested $117 million to set up individual plants and take a role in the design of their parts from the car's concept. Brazil also is the region's first market where consumers can order cars over the Internet, a program GM is initiating with the introduction of the Celta this fall.

A land of both promise and cyclical crisis, Brazil last year saw total vehicle sales fall to their lowest level since 1992, due to an unexpected devaluation of Brazil's currency in January 1999 that caused the region's economic collapse. Only 1.34 million vehicles were produced, with 268,400 units exported, representing less than half of installed capacity. Domestic sales totaled 1,073,600 units.

Automakers today are riding a wave of optimism, with vehicle sales in the first six months up 18%, while production jumped 24%, Anfavea reports. Continued success depends on whether the country's push toward economic growth, predicted at 4% this year, can be sustained while stifling inflation and keeping interest rates low to allow consumers to buy on credit. If so, automakers believe the market will grow to 2 million units by 2005 - enough to help take up the slack in unused capacity and entice even more industry warriors to the battlefield.

Three years ago, an economic fallout had automakers diving for cover in Asia, retreating from an earlier tentative advance on Eastern Europe and scrambling to maintain the semblance of a healthy front in Brazil.

Today, car manufacturers are renewing their offensives on the international battlefield. Once again the fight is on in several key Asian markets, including a gradually opening-up China and an economically recovering Thailand.

Automakers also are showing renewed interest in Eastern Europe and the former Soviet Union, where they are resuming a cautious creep toward entrenchment. And they're calling for reinforcements in Western Europe, where Asian manufacturers are bulking up their beachheads and a sagging euro is pounding profitability. In Japan, strategic alliances are being formulated as automakers gear up for the technological and territorial fight ahead.

In this the first of a two-part installment on the global State of the Industry in 2001, WAW takes a close look at the skirmishes shaping up on the international war front. We'll start this month's 11-page package with the latest intelligence on the global hot spots - Brazil, China, India, Russia, Eastern Europe and South Korea. That's followed by a complete dossier on the "warm" markets of continental Western Europe, Japan, Thailand and Australia, where industry interest and activity remains high but prospects appear less certain. And we'll wrap up with an examination of Indonesia, Malaysia and the U.K., where economic and political factors are putting a chill on the near-term outlook.

With the North American market showing early signs of a slowdown, position and profitability in the near future may very well be riding on success overseas.