March 18, 2020 / 4:31 PM / 16 days ago

GM, Mercedes to furlough all workers in Brazil, suggesting production stop

FILE PHOTO: The GM logo is seen at the General Motors plant in Sao Jose dos Campos, Brazil, January 22, 2019. REUTERS/Roosevelt Cassio

(Reuters) - General Motors Co (GM.N) and Mercedes Benz will furlough all employees in Brazil later this month, the companies said on Wednesday, suggesting that production in South America’s main auto center will be heavily impacted by the coronavirus outbreak.

Brazil’s automakers had been bracing for a potential breakdown in its parts supply chain from China starting in April that could disrupt production. But neither mentioned supply chain issues in their statement.

Automakers are halting production at plants across Europe as they grapple with coronavirus and diving demand.

GM said it needed to “align production to market demands.” Mercedes, owned by Daimler (DAIGn.DE), said it wanted to prevent the spread of the coronavirus.

GM’s Chevrolet is Brazil’s best-selling car brand and the company’s decision could potentially lead other large Brazilian automakers to furlough and halt production.

Mercedes is focused on heavy truck production in Brazil, where it is the market leader.

A union source representing some of GM’s workers in Brazil said they would have liked for the company to furlough workers sooner to protect their health.

The source said the furlough would last March 30 through April 12 and workers will be paid in full, in accordance with Brazilian law.

Mercedes said its furlough will last from March 25 through April 19 and had already been negotiated with its unions.

Reporting by Marcelo Rochabrun; Editing by Andrea Ricci and Lisa Shumaker

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