Vehicle assemblers go into lay-off to adjust production

Some vehicle assemblers have entered into a temporary suspension of work in certain production areas, the so-called lay off, this week. The temporary stoppage aims to adjust production to market demand, which is still low. Even with the incentive to purchase brand new vehicles, specialists point out that the The auto sector is still suffering from the economic consequences of the pandemic of covid-19 and the impact of the government program, announced in June, will not be immediate.

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A Renault is one of the automakers that announced the lay off. Located in São José dos Pinhais (PR), Metropolitan Region of Curitiba, the company informed that the application of lay off will be for around 1,000 employees, lasting two to three months.

In a note, Renault said that this measure was previously planned and was announced on May 30 of this year. Employees’ collective vacations took place between June 12th and 16th. already the lay off started last Monday (3) at the passenger vehicle factory. As of July 10th, the temporary suspension of engine and aluminum injection plants begins.

The automaker informed that all national production is concentrated in Paraná, but that the stoppage measure was necessary to adjust production to market demand. “During the period of lay off Renault will pay additional compensation up to the limit of 85% of net salary, in addition to maintaining all current benefits. Employees participating in the lay off will take a qualification course with Senai, which entitles the monthly qualification scholarship provided by law and paid by the government”, he said, in a note.

In São José dos Pinhais (PR), the Volkswagen do Brasil it will also take a temporary stop to production at its car plants. “To balance inventories with current market demand,” he said in a note. The automaker did not say how much of the national production is concentrated in the State, but stated that the T-Cross vehicle is produced at the factory in São José dos Pinhais (PR) and that it has a shift in lay off since the 5th of June. According to Volkswagen, there is a prediction of duration of stoppage between 2 and 5 months.

“The days off will be managed through all the flexibility tools that are provided for in a collective agreement signed between the unions and Volkswagen employees”, said the company.

At the end of April of this year, the union representative of the Greater Curitiba Metallurgist Union (SMC) at the automaker’s factory, Daniel de Camargo, had already commented on the decrease in Volkswagen production. He said that daily production of 500 vehicles would be reduced to around 300. The unit’s production expectation for 2023 should drop from 100,000 to around 85,000 vehicles. “When there were stops in the past, it was because of the lack of components, but now what is weighing on us is this decrease in demand for vehicles because of high interest rates and difficult access to credit”, lamented Camargo.

A volvo communicated to the report that the assembler has no planning to lay off. However, it will make a one-off interruption, “according to market demand”. “We will stop part of the factory from 07/17 to 07/26. Bus production continues without interruption”, he said, also in a note. The stop will be at the Curitiba factory, where the brand’s trucks are produced.

the factory of Audi, which works together with Volkswagen in São José dos Pinhais (PR), had a stoppage period between June 26th and July 4th. “The production of the Audi Q3 and Audi Q3 Sportback models at the São José dos Pinhais factory was resumed and is proceeding normally”, informed Audi. The automaker did not say why.

Other automakers located in Paraná, such as DAF It is Industrial Driver’s License, stated that they do not intend to stop production. Nissan and Caterpillar did not return to People’s Gazette.

General Motors in São José dos Campos (SP) also entered into lay off

The factories of General Motors in São José dos Campos and Mogi das Cruzes, in the interior of São Paulo, are also in lay offwhich was agreed with the metallurgist union of each unit, since Monday (03).

“The measure is necessary to adjust production to the current market demand, in order to guarantee the sustainability of the business”, according to General Motors. The stoppage will last for 5 months and may be extended for another 5.

General Motors did not inform in which areas this stoppage will be carried out and the concentration of national production at the factories.

lay-off it is necessary to adjust production and avoid mass layoffs

According to Adriana Ripka, PhD in Technology and Society and professor at Universidade Positivo, the lay off It is a strategy used by companies to avoid mass layoffs. “As the demand for some products decreases, the market also manages to reduce production. On the other hand, the vehicle part ends up being very mechanized and to reduce the production part is not something immediate”, he says.

In this way, automakers produce a number of vehicles. But as demand drops, inventories run high. “If you have a lot of product to offer and not much demand, there is a moment when you need to stop production. O lay off it is a measure in which the factories paralyze production for a period and employees are not fired”, explains Ripka.

“Especially because, when the company resigns, when it needs to resume, it has problems to reinstate employees, especially qualified ones”, adds the researcher.

She claims that many automakers were already thinking about doing this stoppage. However, they waited for the government’s incentive program to be announced. “But this type of plan does not have an immediate change in demand”, says the economist.

Despite the government incentive program, the impact takes time to arrive. “There is a great offer and a demand with expectation, but that cannot immediately supply the sale of these vehicles. The forecast for 2 or 3 months of lay off it is a period to align the quantity produced with the demand”, he emphasizes.

“Government measures do not cope with the resumption of production”, says economist

The subsidy program for automakers launched at the beginning of June by the government set aside R$ 1.8 billion to encourage the purchase of brand new cars.

Although there is expectation in the sector, the doctor in applied economics and professor at the Pontifical Catholic University of Paraná (PUCPR) Rodolfo Coelho Prates says that, in practice, these measures have not yet had an effect. One of the reasons is the cost of automakers.

Many parts are imported, making the cost of production high, influencing the consumer’s pocket. “Cars in Brazil, compared to the international market, are expensive”, he explains. “Part of the vehicles are not manufactured here, but are imported, and they are only assembled in Brazil”, stresses the specialist.

Another point is the interest rate. The discount granted by the government does not generate a decrease in the rate, but only in the value of the car. In this sense, many consumers are unable to pay in cash for a vehicle, having to resort to borrowing. That way, the discount won’t have as much impact for people who can’t pay in cash for the car.

“It doesn’t fit in the pocket, the interest has a big impact. When we project for a payment in 5 years with a high interest rate, above 2% per month, this makes the person pay for two cars over that time”, said the economist.

“This R$5,000 or R$10,000 discount is practically unfeasible when we make this long-term projection. Those who can benefit are people who are able to pay in cash. But people who have to pay in installments are going to have a harder time,” she adds.

Automotive sector still suffers the consequences of the economic crisis and the pandemic

According to the doctor in applied economics Rodolfo Coelho Prates, the Auto sector has been suffering from a crisis for 10 years. He exemplified that, in 2013, the monthly average of car sales was 310 thousand. However, in 2023, the average has been 160 thousand sales per month.

“The car market has shrunk a lot in these 10 years and these are the effects of the crisis. Since the crisis that started in Brazil in 2014. Then, when the market was starting to recover, in 2019, the pandemic soon came and it completely collapsed, due to the blockade of economic activities”, he explained.

He adds that the semiconductor crisis globally also affected the production chain. With this, today, automobile companies are facing difficulties. “Demand is low because of these macroeconomic issues, low sales and high unemployment.”

In addition, the average car price grew by 80% to 90% in 5 years, points out the professor of economics. “It went from an average price of R$70,000 to almost R$130,000. In this respect, there is a population without sufficient income and a high price.”

With little demand in the market, automakers need a temporary stoppage, according to the expert. “In this context, automakers are having a measure of stoppage of supply to be able to recover”, he concludes.