UPDATE 1-GM Brazil workers strike, seeking hefty pay raise

Tue Sep 6, 2011 1:13pm EDT

* Union seeking 9.4 pct salary increase above inflation

* Carmakers backing off production due to rising stocks

* Tight labor market pressuring inflation despite slowdown (Adds inflation, background)

SAO PAULO, Sept 6 (Reuters) - Metalworkers at a General Motors Co (GM.N) factory in Brazil decided to go on strike on Tuesday to demand a 17.45 percent wage increase just as the industry is scaling back production amid rising inventories.

Workers at the plant in Sao Paulo state are seeking a 9.4 percent real salary increase above their calculation of inflation. Inflation, measured by gains in the nation's benchmark IPCA consumer price index, is running at an annual pace of 7.2 percent.

The company has offered to raise real wages 2 percent, according to the Metalworkers Union of Sao Jose dos Campos. GM did not comment on wage talks at the factory, which is one of six operated by the carmaker in Brazil.

The negotiations come as carmakers throttle back production due to high inventories and signs of cooling demand in Latin America's largest economy after a red-hot first half of the year. [ID:nN1E7840WP][ID:nN1E7840UO]

Big pay rises are a concern at the central bank, which for the past year has struggled to restrain accelerating inflation in Latin America's largest economy. Banks are another sector currently in talks with unions over pay increases.

Brazil's labor market has remained tight even as the economy slows from last year's torrid growth of 7.5 percent.

Late last month, the ABC Metalworkers Union in Sao Paulo state agreed to a two-year deal to raise real wages by 5 percent.

The number of middle-class Brazilians has grown 25 percent in the past decade, making it a crucial growth market for the world's biggest automakers as developed economies stagnate.

GM shares shed 3.2 percent to $21.36 early afternoon trading in New York on Tuesday. (Reporting by Alberto Alerigi Jr.; writing by Brad Haynes; editing by Phil Berlowitz and Andre Grenon)

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