Battered Brazil Carmakers Say Worst Isn't Over as Job Cuts Loom

  • Industry seeks to lower labor costs as recession drags on
  • Already, 15,000 have been fired and 6,000 more placed on leave

Brazilian car manufacturers are bracing for more job cuts as a once-in-a-century recession in Latin America’s largest economy drags on.

Idle capacity at Brazil’s 65 car plants has skyrocketed to 30 percent after vehicle sales tumbled 27 percent in 2015 from the previous year, according to Luiz Moan Yabiku Junior, president of the national automakers association known as Anfavea. Already, carmakers have fired almost 15,000 people in 2015.

“Companies need to have a positive outlook in order to maintain that personnel surplus without work,’’ Moan said in an interview at Bloomberg’s Sao Paulo office. “If we don’t have that outlook, the way to go is to adjust the workforce.’’

Halfway through a two-year recession that’s forecast to be the worst since at least 1901, Brazil finds itself stuck in a grinding cycle of job loss and falling consumer spending. National unemployment has climbed to 9 percent as retail sales tank and industrial production contracts for 22 straight months, government reports show.

While Anfavea expects auto sales to fall 7.5 percent more this year, even that estimate may prove to be overly optimistic. The association’s January forecast was based on a 2.9 percent economic contraction in 2016. But economists in the most recent central bank survey published Monday say Brazil is set to shrink 3.4 percent.

That leaves carmakers searching for ways to further trim their labor costs, Moan said. In addition to the job cuts, companies have also placed 6,000 employees on mandatory leave and cut back the hours of 36,000 others as part of a government-subsidized program that aims to minimize job losses during economic rough patches, Moan said. As part of the program, carmakers agree to hang onto workers in exchange for the government covering part of the salaries.

FCA Fiat Chrysler Automoveis do Brasil Ltda. and General Motors do Brasil Ltda., the two biggest carmakers operating in Brazil, declined to comment.

“In 40 years working in this industry, I’ve never seen such a complicated situation,” Moan said. Last year was “much worse” than expected because of political turmoil and a corruption scandal that’s hindering efforts to kickstart the economy. “We can’t keep mixing politics with economics because everyone loses.”

Anfavea is set to release data for February vehicles’ production and sales on Mar. 4.

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