May 7, 2012 / 3:00 PM / in 7 years

UPDATE 2-Brazil car inventory highest since 2008 crisis

* Auto output down 15.5 pct in April; sales fall 14.2 pct

* Highest inventories since Nov 2008 -industry group

* Some lenders turn cautious on auto loans as defaults rise

SAO PAULO, May 7 (Reuters) - Automobile production and sales in Brazil fell in April from March, as inventories climbed to their highest level since the global financial crisis of 2008, raising the specter of idling production lines and continued weak industrial output.

Inventories in Brazil’s auto sector amounted to 43 days’ worth of sales last month, according to the national automakers’ association, Anfavea. That was the highest level since November 2008, when stocks reached 56 days of sales.

Last year, carmakers idled lines and furloughed workers as inventories rose to 40 days of sales in October, triggering government stimulus and industry protections that upset regional partners such as Mexico.

A slumping car industry also aggravated a sharp slowdown in Brazil’s industrial output late last year. Banco Votorantim analysts warned in a Monday note that automakers’ weak April signaled a moderate recovery at best for industrial production, which contracted unexpectedly in March.

Vehicle output fell 15.5 percent to about 260,800 cars and light trucks in April, and sales dropped 14.2 percent to around 257,900 autos, Anfavea said on Monday. Auto output and sales had jumped sharply in March from February, following the carnival holiday.

“This is a really weak result and undermines impressions of a sustainable recovery for the industry, said Mariana Oliveira, auto analyst at Tendências Consultoria in Sao Paulo.

“It’s directly related to the shaky domestic market, where we’ve seen slow sales and weak financing this year,” she said, adding that new auto loans in Brazil slipped 12.5 percent in the first quarter from a year earlier.

A quickly expanding middle class has made Brazil a key market for the world’s biggest automakers, including Italy’s Fiat SpA, Germany’s Volkswagen AG and U.S.-based General Motors Co and Ford Motor Co.

Still, Brazilian households are carrying record debt loads after a three-year credit boom, leading to more delinquent loans and greater caution from some lenders.

Banco Volkswagen, the biggest bank focused on Brazil’s auto industry, told Reuters last month it was approving new loans at half the pace of recent years as it sets aside more cash to cover possible defaults.

Fiat held the top spot in Brazil’s auto market, selling 53,519 vehicles in April, down 19 percent from March. Volkswagen was second, with sales of 50,932 cars and light trucks, down 13 percent from March.

GM sold 41,381 vehicles in April, an 8 percent drop from March, while Ford sales fell 14 percent to 24,103 autos.

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