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As Brazil's Auto Profits Soar, Workers Get Shortchanged

BY Brazilian standards, auto worker Dhalma Joaquin dos Santos had been leading the good life. Work was steady, the auto company indexed his wages for inflation, and he was building his family a new house.

But Mr. Dos Santos says the assembly line seems to be speeding up, and wages no longer keep up with inflation. ``The line is running faster, and the company isn't hiring enough workers.''

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He and other auto workers have benefited from a two-year-old pact signed by the auto industry, government, and unions that lowered car prices and guaranteed steady employment. Auto production and company profits are booming as a result of the ``Camara Setorial,'' but unions are beginning to criticize it.

``The pact has benefited auto workers greatly,'' says Carlos Alberto Grana, secretary general of the Metallurgical Union that represents auto workers in the industrial zone near Sao Paulo. ``But production has gone up by 20 percent, and employment only rose 1 percent. We had to picket one plant to demand the company hire more workers.''

Auto-company officials say increased productivity is the price the union must pay to ensure steady employment. ``The time is past when you needed more manpower to produce a car,'' says Renato Luti, media-relations manager for General Motors do Brasil Ltd. GM is cutting costs by speeding up the assembly line and outsourcing some jobs.

The auto industry is starting to compete globally. Brazil has the largest auto market in South America, and companies are exporting to nearby countries, even sending auto parts to the United States.

But for years, a government policy of high taxes kept production low. Under the Camara Setorial, the government cut taxes about 18 percent, while dealers, auto-parts suppliers, and auto companies agreed to cut their profit margins.

As a result, prices fell 22 percent, Ms. Luti says, and GM sales rose 50 percent. In the first half of 1994, passenger-car sales for all companies rose 22 percent over last year. ``The Camara Setorial was responsible for the growth of the Brazil market in the past three years,'' she says. Then last year, federal and state governments lowered taxes on sales of ``popular cars'' - subcompacts with 1 liter engines that cost about $7,400. Volkswagen began producing the Beetle again, and other companies followed with their own popular cars.

Dealers now have waiting lists for these models, largely because others are so expensive. The next-cheapest compacts start at $12,000; modest four-door passenger cars can cost $25,000.

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GOVERNMENT tax policy on the popular car and the Camara Setorial has been a win-win proposition, says Prof. Jose Tauile, director of the Institute of Industrial Economics at the Federal University of Rio de Janeiro. Taxes on vehicles have gone down since the pact's signing, but the government has gotten more ``receipts from taxes due to spectacular'' sales. ``You also had stability in employment for the past two years.''

But Brazil's auto unions say companies have benefited too much. Companies have invested billions of dollars in new machinery, says Joao Martins Lima, a chief shop steward for the Metallurgical Union. ``[Now] we have less manual labor but more back and wrist injuries.''

Workers have also been pressured to work overtime, sometimes up to 100 hours per week when the norm is 44, he says.

Mr. Tauile says the assembly-line speedup has caused problems. ``There was an enormous increase in productivity with the same workers,'' he says. In the further negotiations of the Camara Setorial, he predicts that ``increasing employment might be in sight.'' But so far, no new round of negotiations has been scheduled.

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