Confederação Nacional dos Metalúrgicos da CUT nº 10/01 english edition-October 02, 2001

DaimlerChrysler Closing Down Brazil Plant

DaimlerChrysler AG the world's fifth-largest automotive manufacturer, said on Tuesday it was closing a 190-worker plant in southern Brazil that Chrysler built under a government subsidy program.

The initial decision to suspend production at the Campo Largo plant in the wealthy state of Parana was made in January as part of the recently-merged giants' $4 billion turnaround plan which included 26,000 job cuts worldwide.

Chrysler built the plant less than five years ago under a Brazilian government drive to attract carmakers to the region with tax breaks and help with infrastructure costs.

It began producing the Dodge pickup, known locally as the Dakota, in mid-1998 for both the domestic and export markets.

It stopped production at the plant in April, but continued to pay salaries of the idle workers, according to local newspaper Valor Economico.

Valor said DaimlerChrysler was the first automaker to pull out of the government subsidized region and would have to pay back some 120 million reais ($47 million) in tax incentives Chrysler got from the local authorities.

DaimlerChrysler could not immediately confirm the report, while officials at the Parana government were not available to comment on the matter.

Claudio Gramm, secretary general of the metal workers union in the Parana state capital of Curitiba, which represents DaimlerChrysler Campo Largo workers, said he was not surprised by the decision as the plant had had problems from the start.

He said the Campo Largo factory had churned out just 13,500 Dakotas before production was halted in April, significantly less than it had planned to make when it took advantage of the fiscal incentives to set up shop.

"In the beginning of 1999 they were already reducing work hours and salaries,'' Gramm said. He was getting in touch with local officials to confirm the DaimlerChrysler decision and work out what steps the union would make, he added.

Gramm said he did not expect the other automotive companies operating in the area to follow suit. He said Renault SA (RENA.PA) and Volkswagen/Audi (VOWG.DE), which both received tax incentives to set up operations in the state, were producing well and were unlikely to shut down.

Volvo's truck factory and New Holland agricultural machine plant, both of which were there before the tax incentives were offered, were also unlikely to move, Gramm said.

DaimlerChrysler Brazilian operations also builds Mercedes Benz trucks and buses in the industrial heartland of Sao Paulo and Mercedes A class in the central state of Minas Gerais. (The New York Times, September 0, 2001)

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