Volkswagen to Cut Jobs in Brazil on Weak Demand

Volkswagen, Europe’s largest carmaker, plans to cut nearly 4,000 jobs in Brazil because of a weak auto market in the country.

The reduction amounts to 16% of Volkswagen’s Brazilian workforce of 25,000. Staff at two factories, in Taubate and Anchieta, will be affected, the company said. It employed 325,000 workers worldwide at the end of last year.

“The difficult situation on the Brazilian market forces us to make significant cuts,” Volkswagen board member Peter Hartz said.

Volkswagen sold 20% fewer vehicles in Brazil in the first half of this year, the Brazilian automaker association said this month. The country’s interest rates are near a four-year high, crimping demand and prompting General Motors Corp. and Fiat to also announce plans to trim output.

Germany-based Volkswagen said this month that it would send home 15% of the workers at the Taubate factory, which makes about 1,050 cars a day. The company still plans to develop a new lineup of light trucks and cars in Brazil by 2007.

Brazilian auto production fell 1.9% in June to 141,545 units, according to the automaker association.

Volkswagen has said it also plans to lay off 2,000 workers in Mexico, or a fifth of its workforce in the country. It expects Mexican production this year to decline 30% from its 2000 level.

Analysts expect Volkswagen’s second-quarter profit to drop 55% from the same period last year, according to a Bloomberg survey. The euro’s rise against the dollar, lower sales in Western Europe and the U.S. and investment in new models are crimping earnings.