Despite a 9% month on month rise in average daily sales in the first two weeks of January, vehicle inventories remain high and are causing some automakers concern.

Nonetheless, the credit crisis-induced slowdown is having varied effects on the different brands.

Honda and Toyota are continuing to churn out cars at near-normal pace because inventories were not too high in October when the credit crunch finally hit Brazil. But other newcomers, like the French automakers, have severely cut  production through collective enforced vacations.

PSA, for instance, has just announced another temporary halt in output from today (26 Janaury) to 24 February, on top of the earlier closure from 8 December to 5 January.

Among the 'Big Four' long-established automakers here, GM is ailing the most. Besides declining market share, it is having difficulties with the metalworkers union in São José dos Campos - this hostile union refuses even to discuss production-slowing measures such as a flexi-time 'hours bank'.

Last week GM axed 800 temporary positions for an indefinite period at the plant, prompting a protest strike from the union.

Fiat will impose another temporary vacation period next week.

A number of suppliers employ former workers from the Italian automaker which began outsourcing more than a decade ago.

Suppliers, financially-strapped as orders from automakers slowed, were first to axe jobs but a more cooperative union in the Betim region has helped Fiat trim production without job cuts so far.

On 17 January, Volkswagen called in workers for Saturday production to boost São Bernardo do Campo plant inventory. On the other hand, it dismissed 150 workers at its Taubaté plant, also in São Paulo state, but converted 650 temporary contracts to permanent jobs as a trade-off which suggests it is growing market share.

There are signs the situation in the auto parts industry as a whole is far more worrying. But Sindipeças, the national auto parts manufacturers union, declined to on job cuts.

Fernando Calmon