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April 26, 2005

BRAZIL: Appreciating currency could hit GM exports and output

The Brazilian currency's strength against the dollar may make General Motors’ Brazilian unit reduce exports and output, the unit's head reportedly told local financial newspaper Valor Economico.

The Brazilian currency’s strength against the dollar may make General Motors’ Brazilian unit reduce exports and output, the unit’s head reportedly told local financial newspaper Valor Economico.

“I am in panic, I cannot sleep because of this dollar,” Valor quoted Ray Young as saying in its Monday edition, according to Reuters, which noted that Brazil’s currency, the real, is trading at its strongest levels since mid-2002.

Young reportedly told Valor that GM, which is one of Brazil’s leading car producers alongside Volkswagen, could continue its pace of exports for three months with the current exchange rate, after which it would have to reduce exports and, consequently, production of cars in Brazil.

According to Reuters, he said the exchange rate meant that Brazil did not contribute to GM’s first-quarter profit of $US46 million in the company’s Latin America, Africa and Middle East region – as a whole, GM posted a net loss of $1.1 billion in the quarter.

Young reportedly said GM made a profit from local sales in Brazil, which was offset by a loss from exports.

According to Reuters, Valor said that despite the problems, GM would maintain its planned investment under the programmes that earmarked 650 million reais ($US255 million) to create a new model of its Vectra sedan and $250 million for a new production line that will produce a compact car in the southern town of Gravatai.

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