General Motors axes over 1,000 Brazilian jobs

Global auto giant General Motors Co LLC (GM) said that the company slashed over 1,000 workers in its Brazilian plant in Sao Jose dos Campos in Sao Paulo state.

The layoffs happened due to winding down of one assembly line in the works, which has been going on during the past year following an agreement reached with the workers union in March.

The assembly line was discontinued in August and GM paid the workers through the end of December with many of the workers accepting the company's voluntary resignation programme. Of about 1,800 workers in the plant, a total of 1,053 have been dismissed. Around 600 workers were fired in March.

The company has taken charges of $103 million through September on account of the downsizing in the Brazilian plant.

GM has the third-largest market share in the world's fourth-larges car market with around 17-per cent, behind its European rivals Fiat SpA and Volkswagen AG, and about 10 per cent more than Ford Motor Co, which is in fourth position. The four giants account for about 70 per cent of the Brazilian car market.

But, car sales have been sluggish in the second half of 2013 with sales dropping for all the months barring September and registering the deepest decline of the decade of 23 per cent in August.

December sales were down 1.5 per cent compared to last year with less than 354,000 cars, though those were 17-per cent above the previous month.

Brazil's national dealership group Fenabrave said that car sales in the country dropped almost 1 per cent to 3.76 million vehicles in 2013, against an anticipated 1.5 per cent growth on the back of government's tax incentive on locally made cars through the end of the year.

Fiat was Brazil's top seller of cars and light trucks in 2013, with 762,950 new registrations, or 21 per cent of the market. Volkswagen was second with 666,700 cars sold, followed by GM with 649,730 vehicles.

Fenabrave has predicted a drop of up to 3.5 per cent in the sales of new cars in 2014 in case of higher inflation or wider exchange rate fluctuation.

Economic weakness, waning consumer confidence and rising borrowing costs weigh on the country's automobile market.

Brazil, the world's sixth-largest economy is forecast to grow around 2.5 per cent in 2013, 0.5-per cent lower than the previous estimate, and 4 per cent in 2014.

In its efforts to reduce car imports, the Brazilian government last year introduced a 30-per cent tax on imported cars, which constitute a quarter of the country's light vehicle market.

Car manufactures in Brazil are facing the problem of high operating costs and lower margins as most of the production facilities are old and lacks modern automation. Although, some of the plants are being modernised, more automation means more job cuts.

Industry analysts estimate Brazil's car market to grow on an average 3 per cent annually in the next decade, much les than the 10 per cent average growth seen in the previous decade.