Mercedes fires 500 workers in Brazil amid dip in sales

In the wake of plunging sales, German automobile manufacturer Mercedes Benz has dismissed 500 workers at its Brazilian plant near Sao Paulo, putting about 7,000 others on compulsory short-term leave as it suspends production for some time.

Mercedes Benz said on Wednesday that the workers would have to take leave between June 1 and 15 at the plant in Sao Bernardo dos Campos which employs around 10,500 to produce vans, buses and other heavy vehicles.

Reacting to sales slide, not only Mercedes but other automobile manufacturers such as Volkswagen, Ford and General Motors have also put their workers on leave.

A spokesman told AFP that the decision came amid a deep slowdown in Brazilian auto and vehicle sales, with the economy witnessing slow growth in a fifth straight year. A contraction of around 1.0 percent forecast for this year.

According to the Brazil's automakers' association Anfavea, vehicles production fell 17.5% to 881,770 units between January and April period and sales dropped by 19.2% to 893,630, compared to the same period last year.

The Dilma Rousseff government has reacted to the slowdown by raising interest rates to quell rising inflation, which has made credit for large-ticket purchases such as cars more expensive.

Automakers in Brazil shed over 5% of their workforce recently, adding to rising unemployment and eroding the popularity of Brazilian President Dilma Rousseff, who worked for years to shield jobs in the auto industry.

Brazil recently slid back to the world's eighth-largest vehicle producer, having made 3.15 million units last year - a 560,000 drop on 2013.

(Image: Reuters)