Volkswagen Brazil to keep factories closed through April

Volkswagen AG said on Monday it will keep its factories in Brazil, South America's top auto producer, shut till the end of the month — and that a decision has not been made on whether it will reopen them in May or later.

The car maker has just reached a tentative deal with its unions that will keep workers' net salaries intact, it said. Gross salaries will be reduced but Brazil's government will help make up the difference with subsidies.

If approved, the deal would put Volkswagen's workers in a better position than those at rival General Motors Co, who have taken pay cuts as large as 25%, even including the subsidies introduced as part of Brazil's coronavirus response.

Car makers have all but shut down their plants in Brazil due to the coronavirus outbreak. But as the production hiatus has grown, companies have been negotiating how to cut payroll costs.

The car makers are also aggressively lobbying Brazil's federal government for emergency loans as most do not have enough cash on hand to keep paying salaries for months. They have asked for as much as 100-billion reais (roughly R355bn), reported Reuters — although there is no guarantee that the government would be willing to accept that request.

The president of Brazil's development bank BNDES, which would issue the loans on behalf of the government, said on Sunday that negotiations with automakers should be finalised in May.

Unionised workers at Volkswagen were voting on the proposal on Monday.

Even as most of the industry remains shuttered, tiremaker Pirelli said on Monday that it was resuming limited production at its two Brazilian factories, incorporating social distancing and other health measures.