March 26, 2013 / 8:55 PM / in 5 years

GM cuts workers at Brazil factory on productivity concerns

* Carmaker cuts 598 workers at Sao Jose assembly line
    * Gov't had warned against layoffs, citing tax breaks

    SAO PAULO, March 26 (Reuters) - General Motors Co cut
598 workers on Tuesday at a plant in Sao Paulo state where the
automaker has drawn political fire for attempts to shut down
what it calls an uncompetitive assembly line.
    The decision followed talks with union officials in January,
in which GM agreed to invest about 500 million reais ($249
million) and keep the assembly line, which makes its 10-year-old
Classic sedan, operating at its Sao Jose dos Campos plant.
    The line, which had about 1,800 workers before the layoffs,
will continue to operate at least until the end of the year. The
598 workers who have been laid off had been on paid leave for
several months. GM's entire Sao Jose dos Campos complex employed
about 7,500 workers last year.
    The layoffs highlight carmakers' struggles in Brazil with
climbing labor costs and cooling demand, which caused local auto
production to contract last year for the first time in a decade.
    Productivity also plunged to a nine-year low in 2012,
raising the politically sensitive specter of layoffs in a
sluggish economy. Since last year, GM has faced pressure from
President Dilma Rousseff to retain workers in exchange for tax
breaks that helped prop up sales in the world's fourth-largest
car market. 
    GM's standoff in Sao Paulo is one of the highest-profile
labor conflicts in Brazil, where a tight job market has forced
companies to agree to steep wage increases.
    Unemployment has fallen to record lows despite two years of
disappointing economic growth, helping to shore up the
popularity of Rousseff and her leftist Workers' Party.
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