Back to top

General Motors Down on Brazilian Job Cut

Read MoreHide Full Article

Share price of automaker General Motors Company (GM - Free Report) dipped 0.5% to $40.20 on Jan 7, 2013 after it retrenched around 1,000 employees at its Brazilian operations in Sao Jose dos Campos, Sao Paulo. In Mar 2013, General Motors had penned an agreement with the Brazilian union to close one of the assembly lines in Aug 2013.

According to the agreement, General Motors dismissed around 1,053 workers out of 1,800 people working in the assembly line. The company also fired about 600 Brazilian workers in March. Consequently, the automaker incurred a $103 million charge till Sep 2013.

Though Brazil is the fourth largest auto market globally, it has been witnessing declining sales. New car registrations decreased 2% to nearly 3.6 million in the nation in 2013. Moreover, the Government has imposed 30% tax on imported cars to discourage imports.

The plants operational in Brazil are old and thus expensive to operate. This mars the profitability of the companies. Thus, modernizing the plants is essential to make them profitable.  General Motors is upgrading some of its plants in Brazil, which is resulting in the reduction in work force.
General Motors is the third largest automaker in Brazil after Fiat S.p.A. and Volkswagen AG (VLKAY - Free Report) . It occupies a 17.1% share of the market. Ford Motor Co. (F - Free Report) occupies the fourth position. All of them together occupy a 70% market share in Brazil, where VW Gol is the best-selling car.

General Motors recorded 230,157 vehicle sales in the U.S. in Dec 2013, declining 6% year over year. Retail sales decreased 6%, while fleet sales declined 9%. Annual sales amounted to 2.8 million units, up 7% over 2012. Retail sales for the year also grew 11%.

The company is planning several launches in 2014, including Chevrolet Colorado, the revamped Cadillac Escalade and ELR. New heavy-duty pickups and large SUVs under the GMC and Chevrolet brands are also set for launch. These additions are likely to improve sales in the coming months.

General Motors currently carries a Zacks Rank #3 (Hold).

In-Depth Zacks Research for the Tickers Above

Normally $25 each - click below to receive one report FREE:

General Motors Company (GM) - free report >>

Ford Motor Company (F) - free report >>

Volkswagen AG (VLKAY) - free report >>

More from Zacks Analyst Blog

You May Like