Volkswagen faces Brazil strike

New production methods for the Polo need fewer workers

Workers at Volkswagen in Brazil have voted to go on strike, following the company's decision to cut 3,000 jobs.

The German carmaker is Brazil's largest car maker and it has seen demand for its cars fall as the country's economy has slowed.

It announced the decision to cut jobs last week after it failed to agree cost-cutting measures with unions.

The jobs go on Monday at its Anchieta factory near Sao Paulo, which employs 16,000 of VW's 28,000 workforce in Brazil.

Union negotiations

The ABC Metalworkers' Union - one of Brazil's most influential unions - has been the given the go-ahead to negotiate directly with Volkswagen headquarters in Germany.

"The workers are not responsible for the fall in the market of Volkswagen, which wants to cut wages," ABC President Luiz Marinho told union members.

"If the company loses market share, it is because it does not launch new products."

VW says the jobs cuts were needed because of falling demand and the introduction of new technology.

Car sales in Brazil have dropped sharply since July due to a combination of high interest rates and currency weakness.

VW sales in October were 15% down on the same period last year, while production dropped 13%.

Brazilian woes

Many Brazilian car factories have cut down on production, with some giving compulsory holidays and redundancies.

The Brazilian energy crisis earlier this year and the economic woes of neighbouring Argentina have conspired to weaken the currency and push interest rates higher in one of Latin America's largest economies.

The economy is predicted to grow at some 2% this year, about half of original expectations.

Some traders and economists say that Brazil's markets have largely managed to "separate" themselves from negative international perception of the Argentine economy.

Shares in Brazil - which fell on Monday on news of the New York plane crash - had risen 12% last week.

In the past week, nerves about a possible Argentine default did prompt buying of dollars, sending the Brazilian real lower, but this buying has now subsided.

"People are slightly more positive... although Volkswagen have cut jobs right now they have come out with a commitment saying they won't close any of their five factories in Brazil or their two in Argentina anytime in the next four or five years," the BBC's Tom Gibb said.