GM Lays Off 598 Employees From the Sao Paulo Plant, Brazil image

GM decided to lay off 598 employees at its Sao Paulo plant, which the automaker planned to close attracting political criticism.

After discussion between GM and the labor unions, which took place in January, the automaker agreed to make an investment of $249 million and keep the assembly line which manufactures the Classic sedan. Before the layoffs, the assembly line had 1,800 workers and the company said it will keep operating until the end of 2013. In 2012 the Sao Jose dos Campos plant has 7,500 employees.

These layoffs are a clear sign that GM is struggling in Brazil with a dramatic drop in demand and increasing labor costs, which made local auto production drop in 2012 for the first time over the past 10 years. Beginning with 2012, President Dilma Rousseff has pressured GM to keep workers in exchange for tax breaks which helped the company increase sales in the world’s fourth-biggest market.

In January GM announced it will add a third shift at its Gravatai Industrial Complex in Brazil, creating 2,630 supplier and factory jobs. GM manufactures at the Gravatai Industrial Complex the Chevrolet Celta and Onix and production of another small sedan began in February, for which the additional third shift was necessary.