GM will reduce the workforce at its São José dos Campos, SP, by 10% or 960 employees, according to president of General Motors do Brasil, Ray Young, speaking at the Automotive Sector: Outlook 2006 Review Seminar, organised by AutoData Editora in São Paulo last week.

The move is in response to the increase in the value of the Brazilian real and GM's plans to reduce exports by up to 30%. This reduction will partly be achieved by switching sourcing of the Meriva for the Mexican market from Brazil to Zaragoza, Spain. This means that, unbelievably, it is now cheaper to supply Mexico from Spain than from Brazil. This translates into lost production of 12,000 vehicles a year for the Brazilian plant.

Production at the plant will be reorganised accordingly. The Meriva will be moved to the S10 assembly line, which will gain an additional shift, but the Corsa line, which currently also assembles the Meriva, Zafira and Montana, will drop down to one shift. Young estimates that exports from the plant will fall from 208,000 units in 2005 to 163,000 units this year.

Nevertheless Young confirmed that planned investments at Gravataí, Rio Grande do Sul, will go ahead and result in a doubling of capacity there. This should create another 970 jobs in Brazil. The company is also expected to hire 300 people as it expands its development and design capabilites at São Caetano do Sul.

Earlier this month Volkswagen announced plans to restructure its operations in Brazil in response to the appreciation of the Brazilian currency. It plans to cut almost 6,000 jobs in the country.