Audi Saying Goodbye To Brazil?

SAO PAULO May 15, 2003; Dow Jones reports that auto manufacturer Audi AG could decide in the next two years to stop making cars at its Sao Jose dos Pinhais plant in Southern Brazil, local paper Gazeta Mercantil reported Thursday.

The news is yet another sign that weak demand is forcing automakers to rethink their strategies here.

Mattias Siedl, Audi's head of American sales, told Gazeta in Germany Wednesday that the company will either start building its new A3 model at the plant in the next two years or stop manufacturing in Brazil altogether.

Should Audi pull out, the Sao Jose dos Pinhais plant would be used by Audi's parent company, Volkswagen AG , to manufacture its own models, Siedl said.

Volkswagen is one of the three biggest carmakers here, along with General Motors Corp. and Fiat SpA (FIA).

Auto manufacturers are struggling to sell cars in Brazil, with inflation eroding real wages and sky-high interest rates discouraging spending on big ticket items. In April, sales of locally made vehicles skidded 20% on the year.

Rising exports have helped ease the pain, after the local currency fell 35% against the dollar last year. But a recent rebound in Brazil's real and tough international markets are making for a challenging export environment.