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Brazil's Auto Industry Feels Impact of Financial Crisis

The General Motors plant at Sao Caetano do Sul added a third shift in March. Since then, the company has instituted mandatory vacations to slow output.
The General Motors plant at Sao Caetano do Sul added a third shift in March. Since then, the company has instituted mandatory vacations to slow output. (By Paulo Fridman -- Bloomberg News)

At Sao Caetano do Sul, 5,000 GM production workers have experienced three weeks of such stoppages, said Francisco Nunes, vice president of the metalworkers union at the plant. More days off are planned.

"We're worried about the situation," he said last Monday afternoon in his office. "Just two hours ago I heard there will be no production tomorrow or the day after."

Under a looming GM water tower, the once largely empty parking lots are crammed with Vectras and Corsas waiting to be sold. There is talk of converting the workers' bus lot into parking space for more excess stock. The company has offered employees new incentives to retire. For four months' pay, a lifelong membership at the company club and a going-away party, Luiz Gonzaga, 49, said yes.

"Some people are fearful," Gonzaga said, standing outside the plant's chain-link fence. "But I actually think we need to make room for the younger generation."

"When there's a voluntary dismissal program, that means there are problems," he said. "The difference now is they took on a lot of people recently because the industry was booming, and now there's more people to get rid of," he said.

But this is one of the best jobs around. Many of the other metalworking firms have moved to inner Sao Paulo, and nobody here wants to lose the salary and benefits provided by GM. Of the 16,000 metalworkers in the area, 11,500 work at GM, according to union officials.

Andrade, the assembly-line painter, has spent 25 years at the plant, following his father and elder brother, and has married and raised three children. The work slowdown recalled painful memories of the late 1990s, when the Brazilian auto industry went through hard times and many lost work. In 1998, after the Asian financial crisis, the Ford plant in Sao Bernardo shed 2,800 employees, or 40 percent of the workforce, said Paulo Cayres, a top union official for the Ford workers.

"It's like we see the ghost of unemployment," Andrade said. "There were excellent levels of production, and suddenly, out of the blue, it fell drastically. So we're concerned. We don't know how long the crisis is going to last."

GM of Brazil's officials said they expect to move forward with planned investments over the next four years, including new plants, new auto lines and renovations. Car industry officials said the government bailout measures are beginning to show results.

"The figures will recover a little bit. Perhaps not in the same level we had in August and September, but we will begin to recover. This is the expectation," said Jackson Schneider, president of Brazil's carmakers association.

Despite the troubles in recent months, Brazil's domestic auto market is still expected to grow by double-digit figures over last year, although by less than the 24 percent increase projected this year, Schneider said.

"The conditions became worse, and it really affected the consumer decision," he said. "But these were really good moments for the Brazilian automotive industry."

Special correspondent Brian Byrnes in Buenos Aires contributed to this report.

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