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Latin American Business GM in tax talks with Sao Paulo state as automaker’s Brazil unit loses money

The GM logo is seen at its plant in Sao Jose dos Campos, Brazil.

ROOSEVELT CASSIO/Reuters

General Motors Co’s Brazil unit is in advanced talks with São Paulo state to receive tax incentives, the company told public officials and union representatives at a meeting on Tuesday, a few days after telling workers in a memo that it was losing money in the country.

GM’s top executives in South America attended the meeting along with union representatives and mayors of the two cities where the automaker’s Sao Paolo state plants are based. Two officials representing the two cities told Reuters GM disclosed the tax incentive discussions at the meeting.

“They told us that the conversation with the state is very advanced, very positive,” said Alberto Marques Filho, secretary of innovation for the city of São Jose dos Campos, where one GM plant is based and where the meeting took place.

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GM declined to comment. A representative for the state government said in a statement it has “been working to show the public that it is advantageous to keep the company in São Paulo.”

GM is the undisputed market leader for small cars and trucks in Latin America’s largest economy, but it was not revealed until recently that the automaker was losing money there.

Earlier this month, GM Chief Executive Mary Barra said the company had lowered its break-even point in the region in recent years by 40 per cent, but it still faced “unacceptable losses that need to be addressed.”

“We’ve begun work with key local stakeholders, dealers, suppliers, unions and government officials to take all necessary actions to generate acceptable returns in the near term or to consider other options,” she added at an investor presentation on Jan. 11.

GM posted a memo in its plants in Brazil warning workers that it had experienced deep losses in the past two years and could not keep operating that way. GM has yet to comment on the memo, which was seen by Reuters.

GM, which is undergoing a global restructuring, also has announced thousands of layoffs in the United States and plans to shut two plants outside the United States which it has not yet identified.

The automaker is also looking to negotiate future investments with its unions, the governments of cities where it operates, and suppliers, said José Auricchio, the mayor of another GM plant location, Sao Caetano do Sul.

Auricchio and Marques Filho said GM had told them at the meeting that the governor of São Paulo, Joao Doria, had personally participated in five meetings with the automaker to discuss tax incentives.

The memo added that any turnaround plan for GM would require “sacrifices from everyone.”

Last year, Brazil’s federal government granted car makers with local plants a 15-year package of tax breaks, extending subsidies for an industry that has struggled to compete.

Economy Minister Paulo Guedes, who took office with a new government this month, has said Brazil cannot afford to keep subsidizing powerful industries, arguing that an end to protectionist policies will make the economy more competitive.

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