Issue: Aug 2003


International Trends



Brazil Problems Continue, VW Plans for Layoffs

by Andrea Wielgat

Slow sales in Brazil continue to wreak havoc on automakers in the market with Volkswagen AG being the latest company to announce a series of layoffs.

The automaker recently said it would cut close to 4,000 jobs at its Taubate and Anchieta plants in the state of Sao Paulo. VW has five plants and just under 25,000 workers in Brazil. The move is in response to lagging sales in the country. According to the company, the market should be at about 3 million units but sales currently only touch 1.6 million.

The company has the capacity to build 740,000 vehicles a year but is only producing about 473,000. It has about 26 percent share of the market selling about 380,000 vehicles each year and is one of the top three automakers in the country.

Less than a decade ago many automakers including VW, Fiat, Renault, Ford and GM viewed Brazil as the next automotive promised land. Each invested heavily building plants to produce vehicles for the South American market. But as the worlds economies suffered, the market collapsed leaving automakers with new plants producing well below their capacity. Most companies subsequently reduced headcount in the region leaving thousands of people without jobs.

VWs latest round of layoffs include a plan to place workers at either another VW plant or a facility within the auto sector. VW is helping with those placements by creating a new subsidiary named Autovisao Brasil to help facilitate the reassignments.
Autovisao will reportedly pay workers until they find a new job or agreements made by the union covering their position expire. The job cuts are a part of a five-year VW plan to restructure its Brazilian business. The company will turn the operations into more of a low-cost production/export business by doubling its exports in the next several years. An integral part of that plan includes exporting its Lupo replacement the Tupi mostly to Europe. The company reportedly plans to ship 150,000 of the vehicles each year starting in 2005. It will also build and ship Polos starting early next year.

Additionally, VW is planning a new range of vehicles including cars and trucks for the Brazilian market during the next four years.





French government to sell stake

The government hopes to raise about $1.49 billion by selling 8.5 percent or 24.2 million shares of Renault SA on the open market. The government will also offer 3 million shares to employees. Once the share offering is complete the government will own about 15 percent of the company down from the 25.9 percent it had previously owned. The government plans to hold onto the 15 percent stake for the short to medium term.

Hyundai strike shuts down plants

A strike by Hyundais union workers is causing a parts shortage and pushing overseas plants to temporarily stop production. Workers have refused to work overtime and have held occasional walkouts since the end of June. Plants in Malaysia, Egypt, Russia and Pakistan have had to suspend operations while the companys China plant is close to shutting down. The union is demanding better pay, a shorter workweek and better treatment for workers.

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