LABOUR-BRAZIL: VW Strike Highlights Car Industry Crisis

By Mario Osava Reprint | | Print |

Mario Osava

RIO DE JANEIRO, Nov 13 2001 (IPS) - Workers at Volkswagen’s largest plant in Brazil, who declared an indefinite strike to protest the company’s dismissal of 3,000 employees, marched Tuesday through the town where the factory is located to underline that the lay- offs would hurt everyone.

The president of the ABC Metalworkers’ Union, Luiz Marinho, said the demonstrators – who numbered 10,000 according to the unions and 6,000 according to the police – wanted to get the message across to local businesses and residents in the town of Sao Bernardo do Campo that the loss of 3,000 jobs would mean economic losses for all.

Around 16,000 workers at the Sao Bernardo do Campo Volkswagen factory in the southern state of Sao Paulo, the German carmaker’s biggest and oldest plant in Brazil, declared a sit-down strike Monday.

Marinho said Tuesday that negotiations with the company continued. He added, however, that he did not expect a satisfactory response from the local Volkswagen outfit, and confirmed his plans to travel to Germany to negotiate directly with the company’s top executives.

The trade unionist ruled out the possibility of asking President Fernando Henrique Cardoso to mediate, because – he said – “the president doesn’t know what poverty and unemployment is,” and has refused to act on previous occasions.

Sao Bernardo do Campo and the cities of Santo André and Sao Caetano make up the ABC region around the city of Sao Paulo, Brazil’s biggest metropolis. The area is the hub of the country’s automobile and car parts industry that took off in the 1950s.

Volkswagen has played a key role in the automobile industry in Brazil, where it was the biggest car manufacturer until last year, when it was surpassed by Italy’s Fiat, which has operated in this country for 25 years.

Last week Volkswagen attempted to cut costs by asking workers at Sao Bernardo do Campo to accept a 15 percent cut in wages and a similar reduction in the workday. Another part of the plan was to replace up to 1,000 workers a year with new employees who would be paid salaries 30 percent lower.

The union rejected the proposals, but said it was prepared to negotiate alternatives. However, the company began to send letters last Thursday informing 3,000 workers that they would be sacked Monday.

The failure of negotiations held over the weekend led to the declaration of the strike, approved by a general assembly of metalworkers Monday morning.

The president of Volkswagen in Brazil, Herbert Demel, justified the dismissals by the need to “restructure the outdated” Sao Bernardo do Campo plant, where workers earn 1,700 reais (680 dollars) a month, 150 percent more than their counterparts in the city of Curitiba farther to the south.

Costs must be reduced to the level of other factories and competitor companies, because consumers are not willing to pay higher prices for cars made in Sao Bernardo do Campo, Demel added.

Marinho responded that according to that logic, Volkswagen should dismiss all of its workers in Germany, who earn three times more than workers in Sao Bernardo.

But Demel said the comparison was not applicable, because the intensified competition was not between German and Brazilian-made vehicles, but among those manufactured in Brazil.

According to Marinho, the travails faced by Volkswagen in Brazil were not caused by the workers, whose wages tend to be low, but by the company itself, which has failed to invest in new technology and to launch new products in this country, and especially the ABC region.

Demel acknowledged that Volkswagen’s factories in Brazil were working at just 66 percent of capacity.

All of the big carmakers are currently facing difficulties in the Mercosur trade bloc – the Southern Common Market, made up of Argentina, Brazil, Paraguay and Uruguay – due to overly enthusiastic investment in recent years fuelled by predictions for growth of the Argentinian and Brazilian markets that failed to pan out.

From 1996 to 2000, the German carmaker invested 15.5 billion dollars in Brazil and Argentina, the two biggest Mercosur partners. However, growth of the Brazilian market fell far short of projections, and the severe recession plaguing Argentina since 1998 has increased idle capacity at the company’s old and new plants there.

Brazil has become the country producing the greatest variety of car makes in the world. All large US carmakers have set up shop here, as have most European companies, including Renault, Peugeot and Fiat, several Japanese firms like Honda and Toyota, and South Korean manufacturers like Kia.

Germany’s Mercedes-Benz opened a factory in Juiz de Fora, 180 kms from Rio de Janeiro, to produce cars for the local market. But its sales projections turned out to be overly optimistic, and it is now facing the difficult decision of closing the plant.

The plunge in sales in crisis-stricken Argentina also led several carmakers with factories in both countries to shift part of their Argentinian operations to Brazil.

Strong performance earlier this year in the Brazilian market, where car sales from January to May were 25 percent up on the same period last year, gave way to a sharp drop in the past few months.

Monthly production, which totalled 195,500 units in May, fell to just over 137,200 in September, according to the National Association of Automobile Manufacturers – a clear indication that Volkswagen is not the only firm feeling the heat in Latin America’s largest economy.