Detroit Feeling the Pinch in Brazil : Automobiles: The freeze in auto operations by Brazil’s president is hurting GM and Ford, which have major operations there.

With their Brazilian automotive operations frozen in place for the last three weeks, General Motors, Ford and Volkswagen are suddenly relearning an old lesson--that there can be a downside to going global.

The three auto giants, which dominate Brazil’s auto industry, have been forced to shut down all of their car and truck assembly lines throughout the country since Brazil’s Draconian anti-inflation measures were put in place by the nation’s new president. Overnight, the idlings brought to a complete standstill a huge industry that normally produces 600,000 cars and 200,000 trucks a year.

As a result, Ford and Volkswagen, which have merged their Brazilian operations into a large joint venture called Autolatina, have been forced to furlough 28,000 workers with full pay and now have just 17,000 employees still on the job.

GM, meanwhile, has laid off, with pay, most of its 21,000 workers in the country. GM’s only manufacturing operation that has not shut down there is a factory that produces car engines for export to the United States.

“Our sales in Brazil have been non-existent,” said Ronald Theis, a spokesman for GM’s international operations.

Already, Ford and GM are starting to feel the pinch on the bottom line. For Ford, Brazil represents one of its largest foreign markets outside of Europe--its Autolatina venture accounts for 58% of Brazilian car sales. For GM, meanwhile, its 210,000 sales of cars and trucks in Brazil account for nearly 10% of its total overseas sales of 2.4 million vehicles per year.

GM has yet to comment officially on how Brazil will affect earnings, but earlier this week, Ford told the U.S. Securities and Exchange Commission that the economic crisis could have a “substantial adverse effect on Ford’s earnings” worldwide.

Ford officials on Tuesday refused to say just how big an impact there will be. But Wall Street analysts said that if the shutdown lasted for the rest of 1990, Ford and GM would stand to lose anywhere from $400 million to $700 million apiece.

But even if they reopen their plants soon, the dramatic reduction in buying power among most Brazilians that will result from the anti-inflation program is almost certain to prompt a long-term slump in Brazilian car sales.

Their Brazilian troubles could hardly have come at a worse time for GM and Ford, which have become increasingly reliant on overseas earnings to offset the slump in U.S. car sales.

Tuesday’s announcement by the Brazilian government that it plans to unfreeze some funds so that consumers can take delivery of new cars already on order when the anti-inflation measures were imposed was greeted cautiously by the auto makers. The government said it would unfreeze funds previously locked into auto “consortiums,” a complex retail system that accounts for more than half of Brazil’s car sales and that grew up as a result of Brazil’s fierce hyper-inflation.

Industry officials said they don’t believe the liberalization will allow potential car buyers to place any new orders for cars in Brazil, and so it isn’t likely to speed the industry’s recovery. “Both of them need overseas profits to protect themselves against cyclicality here,” noted Raymond Mucci, an automotive analyst with Baird Patrick in New York.

The severity of Brazil’s inflation-fighting measures--especially the dramatic shut-off of liquidity and credit by the nation’s central bank--has apparently caught the major auto makers off guard, and officials at both GM and Ford acknowledged that they don’t know how long they can keep their workers on full pay while they sit at home.

Rex Greenslade, a spokesman for Ford’s international operations, said Autolatina has tentatively scheduled to resume operations on April 23. But he conceded that the joint venture’s shutdown has so far been extended on a week-to-week basis and could be continued if economic conditions in the country remain unchanged.

“It is almost a day-to-day thing,” said GM’s Theis. “When we will start back up has not been determined. And how long we can keep paying people is a good question.”