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Dispute over wages shuts VW, Scania, Ford, DaimlerChrysler plants

By Romina Nicaretta / Bloomberg News

Striking Brazilian workers shut automobile plants Wednesday at Volkswagen AG, Ford Motor Co., Scania AB and Daimler-Chrysler AG in a wage dispute that threatens to deepen losses in an industry confronting falling sales.

About 24,000 metalworkers at plants in Sao Bernardo do Campo, a city outside Sao Paulo, are demanding a bigger pay rise than the 15.7 percent increase the companies offered. The automakers have refused to boost their offer amid an economic slump that has saddled the industry with losses that Booz Allen & Hamilton Inc. estimates have reached $5 billion since 1999.

"There are no returns from this region," said Albrecht Denninghoff, an analyst at HVB Group in Munich. Volkswagen "has been losing money so why should they pay much more money to workers? The company is as much a victim of the recession in Brazil as its employees."

Volkswagen hasn't had a profit in Brazil, where it's the third-biggest automaker, in the past five years. Ford, the world's second-biggest automaker, has said it hasn't posted a profit in South America since 1995.

Automakers are running their plants in Latin America's biggest country at 45 percent capacity on average after investing $16.7 billion in the past decade on expectations sales would surge, according to the industry association. Sales have dropped 9 percent this year after sinking 7 percent last year.

For the metalworkers of Sao Bernardo do Campo, the dispute is about maintaining their purchasing power after a tumble in the currency fueled a surge in inflation.

The annual inflation rate rose to 15.1 percent in September from 7.9 percent a year earlier. Union leaders are demanding a 20 percent increase for all workers after they received a 10.3 percent raise last year. In the automakers' offer, they proposed giving a smaller increase to those workers who earn more than 4,200 reais ($1,476) a month.

The metalworkers will decide today whether they will keep striking.

Vladimir Caramaschi Ferreira do Vale, an economist at Fator Doria Atherino CV in Sao Paulo, said that the automakers can withstand a shutdown for several days because they have inventories totaling 137,000 units, which equal 33 days of sales.

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Stacy94PGT
My first car was a 67 Mustang Coupe, 2nd one was a 67 Cougar XR-7, 3rd one was a 66 Mustang Coupe. Why did I get rid of these cars for ? I know why, because I'm stupid, stupid, stupid.

My next Ford.....