Mercedes Benz lays off 1,500 Workers in Brazil image

Daimler AG (DAI)’s Mercedes-Benz, Brazil’s second biggest truck and bus manufacturer by market share, said it’s laying off more than 10 per cent of its workforce to cope with a slowdown in what only a few months ago was a market that was predicted to soon overtake Japan as the world’s fifth biggest for auto sales.

All affected employees work at Mercedes’ plant in Sao Bernardo do Campo, Brazil, the company said today in an e-mailed statement.

Brazil motor-vehicle sales fell in April as rising auto-loan defaults led to a constriction in auto credit, while output continued to decline on rising stockpiles and tougher environmental regulation according to the Brazilian Motor Vehicle Manufacturers Association.

Total sales in April fell 10.8% compared to last year and sales of cars and light commercial vehicles were down 10.4%. Total sales reached 257,885 units, down 14.2% from March, and sales of cars and light commercial vehicles were down 13.8% from March.

Truck and bus sales, were unable to recover in the first half of May, falling 13% from the previous month and dropping 28% from the year-earlier period.

Brazilian banks in recent months have tightened up on consumer qualifications for auto loans in the face of a rising default rate. Defaults reached 5.7% of all loans in March, up from 5.5% in February, hitting the highest level in over three years, according to data released earlier Monday by the National Association of Auto Financing Institutions.