Crisis Brings Back Risk of New Job Cuts in Brazilian Automakers

RIO DE JANEIRO, BRAZIL – Recent indicators that the year will not be as bleak as projected at the start of the pandemic will not help save jobs in the auto industry. Automakers now have nearly 7,000 employees off-site, with suspended contracts (lay-off), and most of them believe there is no demand that requires these employees to return.

Based on data from companies and labor unions, the voluntary resignation programs (VR) opened in recent weeks are aimed at attracting roughly this number of adherents. However, this does not imply that companies will succeed and the option will be to dismiss or adopt new flexibilization measures.

Vehicle production fell by 44.8 percent through August, compared to the same period in 2019. The labor force was reduced by 4,000 jobs, to 103,300 workers, almost five percent less than the total employed a year ago.

Dismissals in automakers also mean a reduction in the workforce in component manufacturing plants. Sources in the sector estimate that 15,000 job cuts have already occurred in auto part plants. In the segment, composed mostly of small-scale companies, there are no voluntary resignation programs like those offered by automakers, with attractive proposals.

Volkswagen, for instance, offers from 25 to 35 monthly salaries, depending on their time in the company, for employees who join the VR negotiated with unions of the country’s four plants. The agreement also includes measures that range from a salary readjustment freeze to the suspension of contracts for up to ten months.

When the negotiation began, the company reported having an excess of 35 percent labor, equivalent to 4,700 workers. According to the president of the ABC Metallurgic Union, Wagner Santana, even if this number is not reached, there will be no random cuts, because the company will be able to adopt the flexibilization measures.

In the case of lay-offs, in addition to being longer – the average is typically five months – workers will receive 82.5 percent of their net wages. So far, the government finances part of the wages and the company pays the difference, so workers receive their full net wages. Currently, Volkswagen has 1,500 employees with suspended contracts.

General Motors has 2,700 workers on lay-off in five plants and opened VRs in São Caetano do Sul and São José dos Campos (SP). It has offered extra wages and an Onix Joy car. On the ABC unit, it reached 294 participants. Unsatisfied, it reopened the program last week and is looking for another 500 adherents.

“Our concern is that GM will dismiss workers unless it reaches this goal”, says Francisco Nunes, from São Caetano Metallurgic Union. At the São José plant, there were 235 adherents and GM has dismissed 42 employees. “We are trying to reintegrate them,” says Valmir Mariano da Silva, director of the local union.

Productivity

According to Paulo Cardamone, president of Bright Consulting, cuts would occur in any case due to the improvement in productivity with the adoption of concepts of the so-called 4.0 industry, such as robotization and digitalization. The pandemic has hastened and, perhaps, intensified this process.

“If the market continues to rebound next year, some jobs may be reopened, but I find that difficult,” says Cardamone.

Despite the sales and production review that the National Association of Automotive Vehicle Manufacturers (ANFAVEA) will carry out on Wednesday, possibly from 40 to around 30 percent, and with the shortage of a number of models in stores – such as the Fiat Strada pickup, with a 30 to 60-day waiting list – the consultant does not see many chances of jobs being recovered at the automakers.

Cardamone uses a basic calculation showing that in 2013, a record production year with 3.7 million vehicles, each worker produced 27.4 units. In 2019, with 2.94 million vehicles, the number for each employee was similar, at 27.6 units.

This year, with the production of 1.11 million vehicles by August, the figure is just over 10 units per worker. However, it should be noted that the plants were closed for at least three months.

Crisis weighs less on smaller car manufacturers

The pandemic was slightly less cruel for small-scale companies than for large automakers producing for the mass market. For the ten largest car manufacturers, sales through August dropped by 36 percent compared to 2019. For the ten smallest, with a market share below one percent, the drop stood at 32 percent. None has laid-off workers, although some, such as PSA Peugeot Citroën, operate with working hours and wages reduced by 20 percent.

BMW, from the luxury segment – which dropped even less, by 17 percent in the period – says sales are close to the 2019 level. Production should reach 8,000 units, compared to 7,700 last year. “Right at the start of the pandemic we launched a number of digital projects, such as the sales channel within Instagram and Facebook, and had great acceptance,” says Aksel Krieger, BMW president. The brand will complete 25 launches this year, including hybrid and electric models that have already sold 491 units, compared to 300 in 2019.

Of the three largest manufacturers, only Fiat operates with regular staff and has no plan to open VRs. The Strada pickup truck, sales leader in September, has delivery wait times up to 60 days. “The production capacity of the new Strada has doubled since its launch, in June, to 12,000 units per month, but orders exceed 15,000”, says director Herlander Zola.

The automaker that portrays the sector’s crisis

The result of a R$1 billion (US$200 million) investment, Honda’s second plant in the country, in Itirapina (São Paulo State), was ready in late 2015, amid the turbulence of the economic and political crisis that persisted until 2017. As a result, it was kept closed with its modern equipment covered for three years, until it was inaugurated in March 2019 with the production of the Fit model.

Precisely one year later, when the plant was receiving the production of the brand’s other models to be relocated from the Sumaré (São Paulo State) unit, it was struck by yet another crisis, that of the coronavirus, and was closed again for 108 days, until July 10th.

Currently, the branch employs 1,000 staff, all of whom were relocated from Sumaré, and operates well below its capacity, which is 120,000 vehicles per year, according to Sidalino Orsi Júnior, president of the Campinas Region Metalworkers Union.

The Sumaré plant, which also has a 120,000 annual vehicle production capacity and until 2021 will produce only components, is in a comparable situation and today has 2,000 employees. “The relocation to Itirapina was interrupted”, reports Orsi.

The new plant is already producing the HR-V and WR-V, in addition to the Fit. City and Civic model production should only move there next year.

Honda projects a 40 percent drop in production this year, but states that since the start of the pandemic there have been no layoffs and that “for the time being it should maintain its workforce.”

Between the 13th and 23rd of this month, 1,800 workers will be laid off. The automaker reports that the new period of suspension is intended to perform technical procedures that were planned to take place during the July collective vacation, but was moved due to Covid-19.

The direction of the Japanese brand says it maintains its plan to concentrate the production of cars in Itirapina and leave Sumaré with the components.

“This configuration makes sense, since the powertrain (engine assembly) area, as well as the plastic injection area, has received investments recently and is able to supply the Itirapina plant. The two units will complement each other,” says the company.

However, the group accepts that the current scenario “is challenging for the industry, particularly the automobile industry, which makes plans and investments with a long-term perspective.” Through August, the group sold 47,400 vehicles, 44.6 percent fewer than in 2019.

Source: O Estado de S. Paulo