The Brazilian automotive industry is bracing for the worst downturn year in 17 years, according to new predictions issued this week by the national automakers association Anfavea, as it lowered the year’s total for the second time in the past couple of months.
According to Anfavea, the internal automotive production is forecasted to plunge 17.8 percent from the same period last year, which is a wider drop than the 10 percent fall expected back in April. The industry association also forecasted local deliveries would fall 20.6 percent for the entire year, which is a much sharper decline than in its previous prediction, when they expected a 13 percent tumble. Until recently the world’s fourth largest single auto market, the Brazilian automotive sector has been battered by dwindling consumer confidence and increased interest rates, even as the government has opted to slash subsidies in a new austerity strategy – a move that put salt on the auto industry’s wounds and had thousands laid off as a consequence. Anfavea President Luiz Moan said the automakers have shed nine percent off salaries over the past year and they still want more cuts in the months to follow. “Automakers clearly have an excess of labor,” he commented, adding that today around 25,000 employees are at home in some kind of furlough, making up around one sixth of the total workforce in the industry.
The past crisis of the same magnitude was in Brazil back in 1998, with carmakers then laying off around 19 percent of their employees as the sharp downturn had auto production plummet 23 percent and deliveries drop 21 percent that year.