Brazil finance minister Guido Mantega is due to meet representatives of General Motors and Anfavea, Brazil’s automaker association, to discuss possible layoffs that would violate an agreement made in exchange for tax cuts.
The ministry, GM and Anfavea declined to say what will be discussed at the meetings but analysts expect the government to demand that GM maintain current employment levels or risk losing tax incentives, Dow Jones Newswires reported.
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In response to slumping sales at the start of this year, in May the government reduced what is known as the IPI tax on auto sales and also eased reserve requirements for banks that issue auto loans. In exchange for the stimulus measures, which are set to expire at the end of August, the government demanded companies not reduce employment levels in Brazil, the news agency’s report noted.
Brazil president Dilma Rousseff said “we give fiscal and financial incentives and we want something in return,” according to government news agency Agencia Brasil. She added, “We give them incentives to guarantee jobs. They have to understand that that is the only reason.”
GM is considering cutting jobs as demand weakens for the passenger-car models produced at its Sao Jose dos Campos plant. The company has already ended production of three of the four models of passenger cars it produced there. It has more workers than it needs at the plant, a GM spokesman told Dow Jones, stressing the company has yet to decide on any job cuts.
At the same time it considers shuttering passenger-car production at Sao Jose dos Campos, the company recently added a third shift to produce more light-commercial vehicles at the plant, and it has been hiring at factories elsewhere in Brazil.
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By GlobalDataA recent meeting between GM and the union representing workers at the Sao Jose dos Campos plant led to an agreement there would be no layoffs or strikes ahead of another meeting on 4 August, at which both sides and government representatives will try to work out a solution, Dow Jones reported.
