BRAZIL'S MOTOR INDUSTRY SUFFERS MAJOR SLOWDOWN
Brazil's crisis-ridden motor industry
-- which is dominated by the subsidiaries of Volkswagen AG
<VOWG.F>, Fiat Spa <FIAT.MI>, General Motor Corp <GM> and Ford
Co <F> -- has not made a single domestic sale for the last four
days, and several assembly lines will stop shortly, industry
spokesmen said.
    The motor manufacturers have been feeling the pinch for
months, with demand slumping as the country heads into
recession.
    But the industry hit a fresh problem when dealers decided
on Tuesday to stop buying any cars or trucks to protest high
government taxes on vehicles. The dealers' decision was sparked
by a 33 pct increase in car prices authorized last week by the
government to cover industry's rising costs.
    Spokesman Marcio Stefani of the Brazilian Association of
Autmotive Vehicle Distributors said dealers felt their
livelihood was at stake -- cars aren't selling because they
cost too much.
    "It is a question of our survival. The price of cars in
Brazil has reached an insupportable level," he said. A GM Opala
Diplomata, he said, costs 30,000 dlrs in Brazil, while an
equivalent car in the United States would cost about 10,000
dlrs.
    The National Association of Automotive Vehicle
Manufacturers said that if the trade's boycott continues for
another week, consequences will be serious.
    Association spokesman Fred Carvalho told Reuters, "The
consequences will first of all be collective holidays then
lay-offs and a more and more catastrophic situation."
    A spokesman for Ford Brasil said it would tell about half
of its 21,000 workforce to take holidays June 29-July 13.
    Fiat announced yesterday that it would give 2,000 workers a
month's holiday, from July 6, halting production for the
domestic market.
    Carvalho said the industry was working at 3,500 vehicles a
day, below its 1986 average of 4,700 and capacity of 5,100.
    During last year's Cruzado Plan price freeze, feverish
demand far outstripped supply. The industry says it could have
sold many more cars than it produced, but was constrained by a
lack of parts.
    Today the picture is completely different after months of
raging inflation and demand has all but disappeared.
    Carvalho said the government taxes on cars added 138 pct to
the cost of the vehicle. He described the taxes as "the highest
in the universe and the galaxy."
    Domestic car sales during the first five months of this
year slipped to their lowest level for a decade, 241,632 units
compared with 382,182 units during the same period last year.
    On the bright side, exports are booming -- sales abroad in
May totalled 242 mln dlrs, a record figure.
    The motor industry is critical of the government of
President Jose Sarney, which has gained a reputation as an
indifferent manager of the economy.
    Last month Volkswagen said it was postponing indefinitely
investments of 150 mln dlrs planned for this year.
    Wolfgang Sauer, president of Volkswagen do Brasil, said the
government had created a crisis of confidence.
    Brazil's motor industry employs more than 150,000 people.
 Reuter
