Argentine car sector in crisis as economy ails

BUENOS AIRES Wed May 7, 2014 6:42pm EDT

BUENOS AIRES May 7 (Reuters) - Argentine automobile production stalled in April as demand at home and abroad softened and factory suspensions affected thousands of workers, industry data showed on Wednesday, underscoring growing weakness in Latin America's No. 3 economy.

The country's car production slid 21.6 percent in April to 59,165 units from the same month a year ago, according to data from the ADEFA automobile association. This marks the fifth double digit drop in six months, with output falling 17.9 percent in the first four months of 2014.

The car sector has been hurt by cooling demand at home and in Brazil, the main destination for its exports, in addition to difficulties purchasing key parts from abroad due to high import restrictions and the devaluation of the peso currency.

The government is in negotiations with Brazil over extending a bilateral auto pact to ensure trade volumes. But it also hopes to decrease Brazil's allowance for duty-free exports into Argentina to protect a shrinking trade surplus, which could be bad news for producers needing specific parts.

Suspensions in factories making cars or spare parts have affected as many as 12,000 workers, Argentine newspapers cited the SMATA union as saying on Wednesday. A union spokesman was not available to comment.

Weakness in the sector hurt industrial production in March, according to the latest data. Factory output contracted 5.9 percent from the same month last year.

(Reporting by Sarah Marsh; Editing by Diane Craft)

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