FirstRand drops Brazil plans

Sao Paulo - Financial group FirstRand has dropped plans to team up with Banco do Brasil in a joint venture to provide financing for Brazil's automobile market, which has been hit hard by a slowing economy and a credit crunch.

The Brazilian state-run bank said on Tuesday that it had been notified of FirstRand's decision to pull out of the planned partnership. The venture was announced in July as Brazil's auto market was still booming before the global financial crisis spilled over into Latin America's largest economy.

Banco do Brasil, which planned to invest 980 million reais in the venture over two years, said it would not create the vehicle financing unit on its own. It did not say why FirstRand decided not to go ahead with the venture.

The announcement comes as Brazil's auto market is cooling after years of torrid growth. Car and truck sales slumped in November for the second straight month, tumbling 25%, according to national dealers' association Fenabrave.

The slowdown has prompted several automakers to put factory workers on paid leave to avoid building up costly inventories, and union leaders have said they fear layoffs could follow. On Monday, Volvo AB became the first manufacturer in Brazil to cut jobs when it laid off 430 workers at its truck plant in Curitiba.

Brazil has become a crucial market for global automakers such as Italy's Fiat, Germany's Volkswagen AG, U.S.-based General Motors Corp and Ford Motor Co. Asian and French manufacturers are also beefing up their presence in Brazil.

- Reuters