GM warns Brazilian workers against losses and difficult recovery plan

Thomson Reuters

By Marcelo Rochabrun

SAO PAULO (Reuters) – General Motors Co has warned employees in Brazil that new investments in the country are contingent on a painful plan to make the country profitable, according to a note released by Reuters on Saturday.

In a message posted in Brazilian factories, Carlos Zarlenga, GM's senior executive in Brazil and Argentina, said that after a hefty loss in the last three years, the operation had reached "a critical moment that would require sacrifices of all ".

The memo referred to comments made last week by Executive Director Mary Barra during investor presentations on the challenges facing South America. "We will not continue to deploy capital to lose money," she said in a quote repeated by Zarlenga.

GM spokesmen in Brazil did not immediately comment on the memo, which had been reported for the first time by S.Paulo's O Estado newspaper.

The terrible tone shocked some Brazilian workers, where GM overtook Volkswagen AG and Fiat Chrysler Automobiles NV to become the industry's sales leader, as the economic recovery slowed slowly.

In April 2018, Mr. Zarlenga touted the merits of a new family of low-cost cars at Brazilian dealerships this year, as part of an interview with Reuters. He said that recession-related cost reductions, including a 35% reduction in Brazilian labor, led to limited profit in South America in 2017.

While the Brazilian economy has gradually recovered after the recession of 2015-2016, Argentina has fallen back into recession last year due to inflation and crater. of his currency. Investors are keeping a close eye on whether the presidents of both countries can achieve the hard economic reforms promised.

Zarlenga said regional leaders had prepared a "sustainability plan" for Detroit's senior management, but that they still needed the support of local unions, suppliers, dealers and the government. "GM's investments and our future depend on this plan," he said.

Last year, the Brazilian government granted car manufacturers a set of 15-year tax breaks, extending subsidies to an industry that was struggling to compete directly with production elsewhere. .

Economy Minister Paulo Guedes, who took office with a new government this month, said Brazil could not afford to continue subsidizing powerful industries, saying the end of policies protectionists would strengthen the competitiveness of the economy.

(Report by Marcelo Rochabrun, additional report by Tatiana Bautzer, writing by Brad Haynes, edition of Tom Brown)