Volkswagen has laid off temporarily 4,200 workers at its second largest factory in Brazil for three weeks, a local union said.

Reuters noted disappearing demand is forcing carmakers in the country to manage excess capacity.

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A representative of the metalworkers union of Taubate, about 90 miles (150km) northeast of Sao Paulo, told the news agency the move had stopped production at the plant, which makes the top-selling Gol hatchback, the Voyage sedan and the Up city car.

VW representatives declined to comment on the situation at the factory but issued a brief statement saying “Volkswagen has made use of flexible methods to adjust production volume to the demands of the market.”

As exports to Argentina have plunged and demand in Brazil hits its worst downturn in over a decade, VW is cutting a shift at the Taubate plant and sending workers home for three weeks as part of the transition, the union official said.

Just over a year ago, VW announced a spend of BRL1.2bn (US$370m) at the plant to produce the Up, but the new model has struggled to catch on in a weak market.

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The Up was the ninth most sold car in Brazil in January and February, selling at about half the pace of Fiat Chrysler Automobiles’ market-leading Palio. Volkswagen’s weak start to the year has seen it slip into third place in Brazil by sales, behind Fiat and now General Motors, Reuters said.

“If the Up were selling well, Volkswagen would be suffering a little less. It would dampen the critical situation for the industry this year,” automotive market analyst Raphael Galante of Oikonomia Consultants told the news agency.