October 8, 2018 / 7:31 PM / a year ago

Volkswagen furloughs workers in Brazil as demand from depressed Argentina weakens

FILE PHOTO: A Volkswagen logo is pictured in front of a slum, at the Volkswagen plant in Sao Bernardo do Campo, near Sao Paulo January 8, 2015. REUTERS/Nacho Doce/File photo

SAO PAULO (Reuters) - Volkswagen’s (VOWG_p.DE) Brazil operation is putting workers on a 20-day furlough, the company said on Monday, citing reduced demand from Argentina, which is undergoing an economic crisis that has derailed growth and slashed spending power.

“While the Brazilian market is growing in 2018, exports to Argentina have seen a momentary reduction,” the company said in a statement. Argentina is the top international destination for Brazil-made cars.

The furlough will affect workers from Volkswagen’s Taubaté factory, which is located in the state of Sao Paulo and employs some 3,500 workers. The company would not say exactly how many employees will be put on furlough.

Furloughs are common in Brazil where labor laws are very strict, making layoffs more costly. This is at least the second time that Volkswagen has put some of its workers on furloughs to slowdown production this year.

The union representing the Volkswagen workers confirmed the furlough, but did not provide more details.

At an event last month, Volkswagen’s Latin America CEO, Pablo Di Si declined to say whether the region is currently profitable for the company.

Volkswagen’s Taubaté plant produces the models Up!, Gol and Voyage.

Reporting by Marcelo Rochabrun and Alberto Alerigi Jr.; Editing by Alistair Bell

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