The layoffs, which represent 11 percent of Volkswagen's (VW) 26,800 total Brazilian work force and are among the largest in the country's recent history, are part of the automaker's plans to cut production costs and weaken the auto workers union. They follow the failure of negotiations began earlier in November.

After the breakdown in the talks, the union accused VW of blackmail and promised to go out on strike as soon "as the first layoff is announced," according to press reports.

Volkswagen bosses claimed that the auto workers' refusal to accept "more flexible shifts" left them no option but to institute the job cuts.

Auto workers voted unanimously to strike at a mass rally outside the factory complex on the morning the layoffs took effect. They also authorized union representatives to negotiate directly with VW headquarters in Germany.

Union leaders told the assembled workers that the termination was an act of "aggression, truculence, cowardice, and terrorism." According to press reports, workers went to the production line after the vote and stayed there the rest of the afternoon.

The company has defended the layoffs by pointing to the sharp drop in car sales in Brazil in the context of a slowing economy, a weakening currency, and high interest rates.

Brazil's auto industry reported that car sales fell 15 percent in October last year, while production dropped 13 percent.

Although capitalist economists have praised Brazil for its efforts to distance itself from the effects of the 41-month economic recession dragging down the economy in Argentina, the Brazilian economy has not avoided the effects of the worldwide slowdown that is hitting hardest in underdeveloped countries. According to the Wall Street Journal, the growth in Brazil's gross domestic product has dropped from 4.5 percent in 2000 to under 2 percent this year. Many industries have carried out large-scale layoffs and face wholesale bankruptcies.

"The workers are not responsible for the fall in the market of Volkswagen, which wants to cut wages," said the ABC Metalworkers union president, Luiz Marinho, at the rally at the São Bernardo do Campo plant. He blamed VW's sales shortfall on the company's failure to launch new products. Company officials have stated that they need to reduce the payroll to remain competitive. The company also plans to invest $769 million in refurbishing the plant where it will produce a new range of models by the end of the year.

Volkswagen, the largest car manufacturer in the country with 27 percent of Brazil's market share, is facing sharp competition from Fiat, which has 26 percent. The German auto maker is seeking to cut the average wage of auto workers in the São Paolo area by more than half, down to the levels paid in the south of the country. In their drive to weaken the union, auto firms have been shifting production out of São Paulo, traditionally the center of the auto industry, and a union stronghold.

The Financial Times stated that the VW bosses' latest moves are a signal of their "readiness to confront the union, whose strength has declined over the past 20 years."

The strike is expected to cut VW's daily production by between 850 and 900 cars. The union is considering picketing car dealers in anticipation of company attempts to blunt the strike's effectiveness by using stocks accumulated during a period of declining sales.  
 
 
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