The Sao Paulo state government on Tuesday said it would extend a 4bn reais ($1.8bn) credit line to the local auto industry to help it cope with the financial crisis.

The state's finance secretariat said in a statement cited by Reuters that the money would be lent by state-controlled bank Banco Nossa Caixa, which would offer loans with maturities of up to 18 months to vehicle financing units.

Sales of new cars and trucks in Brazil fell 11% in October and a number of plants are now putting workers on temporary furlough or even offering buyouts.

The slowdown finally hit after three years of strong, credit-fuelled growth but credit availability has all but disappeared in the last two months, and sales in export markets have also dropped.

The federal government has also instructed state-run Banco do Brasil to make a available a total of 4bn reais so that vehicle financing units can increase lending and spur sales, Reuters added.

Local auto industry players include long-established Fiat, Volkswagen, General Motors and Ford plus the more recently arrived Toyota, Mitsubishi and Honda and French manufacturers Renault and PSA.

The automakers have recently cut back on production by reducing shifts and ordering factory workers to take periods of paid leave to avoid building up vehicle stocks.

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