Brazil auto output dips in June despite sales jump

Reuters (São Paulo) - Automobile production in Brazil slipped in June, despite a sharp jump in sales due to tax breaks, as car makers drew down inventories and remained cautious about restarting idle production lines.

Auto output dipped 2.6 percent while sales jumped 22.9 percent in June from May, automakers association Anfavea said on Thursday.

Anfavea President Cledorvino Belini said the group was maintaining its outlook for mild sales and production growth this year, despite a disappointing start to 2012.

In the first half of the year, production of new cars, trucks and buses fell more than 9 percent from a year earlier, as rising loan defaults and tighter lending choked demand in the Brazilian market that was booming just a year ago.

"I think upcoming numbers will be good, but we prefer not to revise the forecast yet," Belini told reporters. "We want to see how things go through the end of August."

Dealership group Fenabrave cut its forecast on Tuesday to a 0.5 percent drop in car, truck and bus sales this year, from an earlier outlook for 3.5 percent growth. If sales drop in 2012 from last year, it would be the first annual contraction in the Brazilian market since 2003.

Policymakers have responded with a battery of measures to bolster the industry, from renegotiating a trade accord with Mexico to spurring new auto loans and slashing industrial taxes in May.

The latest tax break unleashed a wave of pent-up demand in June, driving sales to about 353,200 new vehicles, up 35 percent from a year earlier. Daily sales volumes averaged more than 17,500 units in June after stagnating below 14,000 per workday since the start of the year, according to Reuters calculations.

Still, output from Brazil's car factories continued to lag a year earlier. The industry produced a little more than 13,500 vehicles per day in June, averaging less than 12,500 per day in the first half of the year. Daily output in the first half of 2011 averaged nearly 13,700 vehicles.

OUTPUT, PAYROLLS SHRINKING

Automakers have been wary about ramping up production since stocks in the industry climbed in April to their highest level since the global financial crisis of 2008.

Manufacturers' defensive stance has led to a string of payroll cuts as factories adjust to plunging expectations for economic growth, from a robust 7.5 percent in 2010 to an estimated 2 percent this year.

Volvo was the latest automaker to announce job cuts this year, laying off workers at a truck factory on Wednesday. Mercedes-Benz announced it would cut 1,500 workers in May.

The metalworkers union at a General Motors plant in Sao Jose dos Campos staged a demonstration outside the factory on Thursday to protest what they called the "imminent" closing of an assembly line employing 1,500 workers there.

Voluntary buyout offers at the factory have been accepted by 356 workers since early June, according to union officials.

GM confirmed the buyout offers, but has not publicly committed to plans for the assembly line making Meriva, Zafira, Corsa and Classic passenger cars.

"It depends what the market does," GM's senior vice president in Brazil, Marcos Munhoz, told Reuters in an interview this week. "If people stop buying those models, we have a problem."