German auto manufacturer Volkswagen recently announced that it is laying off some of its workers in its Brazil facility. The company said that the workers will be put on a 20-day furlough. Volkswagen added that reduced demand from Argentina is one of the reasons for this recent decision.
Argentina is currently experiencing a serious economic crisis which has affected the country's growth and also affected the county's spending power. In a statement, Volkswagen said that the while the Brazilian market continues to grow this year, Argentina has experienced quite a recession. It is important to note that Argentina is the top international destination for cars made in Brazil.
The Volkswagen layoff will affect workers on the company's facility base on Taubate which is locate in the state of Sao Paulo. Volkswagen did not confirm how many workers will be affected by the furlough. On the other hand, company data shows that the Sao Paulo facility employs around 3,500 workers.
In Brazil, labor laws and regulations are very strict. Because of this, furloughs are more common in the country due to layoff will be more costly. This is the second time that Volkswagen has furloughed some of its workers due to a decrease in demand and in return a decrease in production.
On the side of the workers, the union representing them have confirmed the company's decision to furlough some of its workers. However, the union did not provide additional details.
In an event hosted by the company last month, Volkswagen Latin America Chief Executive Officer Pablo Di Si did not offer to a comment whether the South American region is still profitable. Nevertheless, recent data from the various statistical company revealed that while Volkswagen's performance in the region remains positive, its growth is experiencing a steady decline.
The Volkswagen Taubate facility is responsible for the production of the company's Voyage, Gol, and Up! Models.
In related news, Ford has recently announced that it is also putting a halt to the production of its Focus car models in Argentina by 2019. Ford said that it will put a complete stop to production by May 2018 citing losses from its operations in the region as one of the many reasons for the closure.
Ford added that despite the stoppage in the production of the Focus car model, the company will continue to build its Ranger compact pickup trucks at the Argentinian facility of Pacheco. The plant reportedly employs about 3,440 workers.
