SAO PAULO -(Dow Jones)- General Motors Corp. (GM) can't seem to get a break as one of its most lucrative markets, Brazil, saw November sales decline to its lowest levels yet this year.
The Brazilian Motor Vehicles Manufacturers Association, Anfavea, said Thursday that GM and rivals Volkswagen AG (VLKAY) and Fiat SpA (FIAZY) all saw steep drops in car sales last month because of tight credit. GM sales declined 35.2% in Brazil in November.
At a time when GM could use some good news, General Motors do Brasil Ltda's lackluster sales for two consecutive months provide no relief to a company fighting for its future.
GM sold 23,460 cars and trucks in Brazil last month, far below its October sales and behind rivals Volkswagen and Fiat, with roughly 33,000 units each.
Brazil is GM's largest market outside the U.S., with record-breaking sales of 498,664 vehicles last year and 550,000 expected in 2008.
Brazil is GM's third largest market behind the U.S. and China for its Chevrolet brand, the only GM model sold in Brazil.
The local auto market started slowing in the second half of September, triggered by a restriction of credit that shows no signs of a rebound so far.
GM originally planned to sell 600,000 cars and trucks in Brazil and recently lowered its 2008 revenue forecast to BRL9.5 billion from BRL11 billion as a result.
Sales declines are due to tighter credit more so than a slowing economy.
Around a billion Brazilian reals, or $403 million, evaporated from the car loan market over the last two months, according to Anfavea President Jackson Schneider.
Car loans shrank to BRL136.6 billion from BRL137.6 billion as banks respond to the international credit crunch by being more cautious.
None of this bodes well for GM, which doesn't expect to break even in the U.S. until 2012.
Although GM in Brazil is not required to send large percentage of its profits to the U.S., that the subsidiary is profitable at all does help the parent company.
GM did not reveal what percentage of its profits or the amount it will send to the U.S. this year.
Speaking on behalf of the industry, Schneider said, "Besides credit problems for new and used cars, consumers are certainly being more cautious."
The industry laid off 480 full-time employees in November, most of them at truck assembly plants.
GM did not lay off any of its 23,974 employees. International auto makers like GM employed 131,237 workers nationwide as of November.
Auto makers in Brazil responded to two consecutive months of poor sales by putting the breaks on production. GM and its competitors made 34.4% fewer vehicles in November for a total of 194,879 vehicles.
For global auto makers, sales in Brazil have been one of the last safe havens in recent quarters amid shrinking demand on their home grounds and slowing growth in other emerging markets, mainly China and Russia, as the financial crisis spreads.
Auto sales growth in Brazil has been fostered in recent years by cheap credit for working class Brazilians, many of whom were able to afford a new car for the first time.
GM is the third largest auto maker in Brazil, trailing Volkswagen and Fiat. Ford Motor Co. (F) is the fourth largest.
-By Rogerio Jelmayer and Kenneth Rapoza, Dow Jones Newswires; 5511-2847-4541; kenneth.rapoza@dowjones.com (Christoph Rauwald contributed to this article.)
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