GM could cancel $1.6 billion investment in Brazil

Sun Feb 21, 2016 10:24am EST
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SAO PAULO (Reuters) - General Motors Co (GM.N: Quote) will reconsider plans for new investment in Brazil if the economic and political situation does not improve, the company's president Dan Ammann said in an interview published on Sunday.

Brazil was until recently one of the world's five biggest auto markets, but it has sunk into the worst recession in 25 years and business confidence has been undermined by political uncertainty and a bid to impeach President Dilma Rousseff.

"I hope to see political and economic advances in the next six to 12 months, which would allow us to stick to our investment plan," Ammann told the Estado de S.Paulo newspaper.

Otherwise, GM would "re-evaluate," he said.

GM announced last year that it plans to invest 6.5 billion reais ($1.62 billion) in new products and technology in Brazil through to 2019.

But recession has hit the auto sector badly. Production of cars and trucks dropped 29.3 percent in January from a year earlier, the lowest for the month since 2003, and sales fell 38.8 percent, the lowest monthly total in almost nine years, according to the national automakers association Anfavea.

Despite the severe downturn, Brazil remains a major base of operations for Fiat Chrysler Automobiles NV (FCHA.MI: Quote), Volkswagen AG (VOWG_p.DE: Quote), Ford Motor Co (F.N: Quote) and GM.

Barry Engle, GM president for South America, said in the same interview that Brazil needs changes in fiscal policy and reforms to its tax, labor and regulatory laws because it is "terribly uncompetitive."

A third of the Brazilian auto industry's nearly 130,000 workers are on some kind of furlough, as automakers struggle to cut capacity without resorting to more costly layoffs.   Continued...

Dan Ammann, President of General Motors, poses after news conference in Sao Paulo July 28, 2015.  REUTERS/Nacho Doce