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Automotive sector seeks Governmental help to overcome crisis

By July 26, 2016 No Comments

The Brazilian automotive industry joined forces with the metalworkers to ask for Governmental support. Due to the economic crisis in the country, the sector has been directly affected, reducing the demand for cars and, consequently, the sector activity. Both parties seek Governmental support in order to be able to reduce working hours and maintain the workers until the economic situation is improved.

Currently, auto-part and car producers are using only 48% of its total productive capacity. The Government is already supporting the sector with the creation of a Labor Protection Program (PPE), an initiative that allow companies to reduce work hours and salaries while the Government financially compensates part of this cut. Due to the longer endurance of the crisis and its impacts on the sector, the Minister of Labor, Mr. Ronaldo Nogueira, has announced the intention of making PPE permanent.

According to Mr. Antonio Megale, president of the National Association of Automotive Vehicle Manufactures (Anfavea), the car industry strongly believes in the recovery of the sector and, therefore, is struggling not to dismiss skilled workforce. The economic situation is not the only challenge the automotive industry is facing. Changes in people’s habits also may play a part on the decrease in the demand for cars, as public and shared alternatives options rise. The alternative to the automotive industry would be to invest heavily on technology and develop innovations, in order to make it more competitive and appealing to consumers.

Investments on technology and programs such as PPE, although palliative, should not be seen as the only solution to the industry. Some of the sector’s real problems rely on the high costs of taxes, labor and raw materials. The antidumping investigation recently initiated by the Brazilian Government against the imports of hot-rolled steel from Russia and China may aggravate this situation. The imposition of duties on two of the main origins of steel will likely increase the costs of the entire productive chain based on steel, including the automotive sector. Therefore, it seems to be important that the industry not only focus on maintaining its workforce, but also on tackling the high costs of its raw materials. In this regard, to oppose protectionist measures that directly impact the already high production costs of the sector seems to be the right path to follow.

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