Volkswagen to keep factories closed through April in Brazil

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Volkswagen AG stated on Monday it will keep its plants in Brazil, South America’s top auto producer, closed through the end of the month, but that a decision has not been made if it will resume them in May or later.

The German automaker has just reached a tentative deal with its unions that will keep employees net salaries intact. Gross salaries will be decreased but the Brazilian government will help make up the difference with subsidies.

If approved, the deal would put the workers in a better position than those at American automaker General Motors, who have taken pay cuts as much as 25% even including the subsidies introduced as part of the country’s coronavirus response.

Automakers have all but closed their plants in Brazil because of the coronavirus outbreak. But as the production hiatus has increased, companies have been negotiating how to slash payroll costs.

The automakers are also aggressively lobbying country’s federal government for emergency loans as most do not have enough cash on hand for paying salaries for months. They have asked for as much as 100 billion reais ($18.88 billion), although it is not confirmed if government would be willing to agree with such a request.

The president of Brazil’s development bank BNDES, which would release the loans on behalf of the government, stated on Sunday that negotiations with automakers should be completed in May.

Unionized workers at Volkswagen were casting their votes on the proposal Monday, through the end of the day.

Even as most of the industry remains closed, tiremaker Pirelli stated on Monday that it was restarting limited production at its two Brazilian plants incorporating social distancing and other health measures.

About 40,581 people in Brazil have been confirmed as being infected with the coronavirus. The virus has killed 2,575 people in the country.

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