With Deepest Fall in 10 Years Car Industry in Brazil May Lay Off Hundreds of Workers

GM factory in Brazil Brazilian General Motors Co wants to put nearly a fifth of its workers at a factory in Brazil on paid leave, an auto workers union said this week, amid falling output in Latin America’s largest economy.

Calling the move “unnecessary,” the union said 1,000 of 5,200 workers in São Jose dos Campos, São Paulo state, could be laid off. Workers and the Detroit-based auto maker will likely discuss the proposal on August 1, a union leader said.

Brazil’s production of cars, trucks and buses is expected to have its steepest decline in 16 years at 10% in 2014 as sales retreat 5.4%, according to national automakers’ association Anfavea.

Reducing the workforce is one of automakers’ few ways of protecting profits as new factories, weak demand and evaporating exports to Argentina batter profit margins in a market that for years had stood out amid meager global growth.

General Motors put 940 workers at the same factory on paid leave in 2012, and the union said 598 of them were later fired. The factory produced models that have been discontinued, like Meriva and Zarifa, and now makes S-10 trucks and motors.

Germany’s Volkswagen put 900 workers in Brazil on paid leave in May and France’s PSA Peugeot Citroen started a voluntary leave program for workers in Rio de Janeiro state that same month.

Santander’s Apology

Banco Santander Brasil SA, apologized for a note sent to some of its high-income clients in Brazil saying the economy would worsen if President Dilma Rousseff’s chances of being re-elected stabilized or improved.

The text was part of a monthly statement sent to customers representing about 0.2% of the bank’s client base, the lender said on its website on Friday. The note said stocks and the currency could reverse gains if Rousseff stems her drop in voting polls, according to newspaper Folha de S. Paulo, which leaked the report.

The note “in no way reflects the position of the institution,” Santander said on its website. It violated an internal directive that economic analysis sent to clients shouldn’t contain “political or partisan bias.”

Speculation that Rousseff is losing popularity as the October election approaches amid the slowest economic growth in two decades has helped push the Real up 5.9% this year.

The Ibovespa benchmark stock gauge has jumped 29% from this year’s low in March on bets that a change in government will reduce intervention in state-owned companies.

Since taking office in January 2011, Rousseff stepped up the government’s role in industries such as utilities and energy, changing concession renewal rules to lower electricity rates and forcing Petrobras, the state-run oil producer, to charge below-market gasoline prices to tame inflation.

Support for Rousseff among potential candidates for the October 5 election slipped to 38% from 39% last month, according to an Ibope July 18-21 poll, which has a margin of error of plus or minus two percentage points.

Candidate Aécio Neves is running second with 22% compared with 21% in June.

Recent DataFolha and Sensus polls show Rousseff’s advantage over Neves in the second round falls within the margin of error, making the outcome too close to call.

Mercopress

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