The Brazil unit of General Motors announced on Wednesday a voluntary layoff program at its Sao Jose dos Campos plant in an effort to match current production volume to employment levels. The news comes on the heels of declining auto sales in the country, as Brazilian auto sales continued to slide in May due to tight auto credit in light of the weak global economy.
The voluntary layoff program, which runs through June 15, comes in the face of the factory adding a shift shift to produce the Chevy S10 truck, known as the Colorado in other global markets. Instead of hiring new employees, the automaker will transfer workers from other shifts to fill the third shift.
GM didn’t say how many employees it expects to lay off as part of the program but said in a statement to the media that its decision to initiate the layoff program was “based on the intense competitiveness of the Brazilian vehicle market, in addition to growing costs of labor, raw materials and supplies in general. GM believes that, with this measure, it will be able to reach the structural adjustment that is adequate to its current production program.”
Last month, the government of Brazil cut the tax on auto sales and decreased the reserve requirements banks are required to carry on car loans. However, when the country’s finance minister Guido Mantega announced the measures, he said that the country’s auto makers agreed to not lay off employees until the tax stimulus is over at the end of August. According to a note from GM’s press office, however, the automaker doesn’t consider its layoff program to be in violation of the agreement due to its voluntary nature.
For a round of good news, analysts in Brazil predict that employment levels across the industry will level off as the automotive recovery is seen coming in June. The General sold 45,826 cars and 8,959 trucks in May in Brazil, marking a slight improvement over April but still coming in lower than the sales levels in May 2011.