Brazil Minister to Convince GM Not to Lay Off Employees image

Guido Mantega, Brazil’s Finance Minister, will meet GM and Anfavea next week to discuss auto maker’s decision to cut jobs.

According to Mantega, GM’s decision would violate the agreement made in exchange for tax cuts. The ministry regularly meets Anfavea to settle new auto industry rules that will be applied next year. Next week, on July 31st, he will also meet GM to discuss the company’s decision to lay off 1,500 employees. No details were given about what the three parties will discuss, but analysts expect the auto maker will have to choose between keeping the current employment levels or losing tax incentives.

In May, due to slow sales at the beginning of the year, the government decided to reduce the IPI tax on auto sales and make easier the reserve requirements for banks that offer auto loans. In exchange for these measures, which will expire at the end of this August, the government requested car makers not to lay off workers in Brazil. If auto makers do not comply, the tax breaks could be suspended before the end of August.

GM plans to lay off employees at Sao Jose dos Campos plant as demand for the passenger-car models produced at this facility decreased. As the company already eliminated production of three of the four passenger car models produced here, it now has more employee than necessary.