Chinese automaker Lifan stops producing in Uruguay and leaves the country

RIO DE JANEIRO, BRAZIL – The Chinese automaker Lifan announced that it is leaving the country and will no longer produce vehicles at its industrial plant in San José.

Union leader, Ruben Villafan, told El Observador that the decision was communicated on Monday, October 25, during a meeting at the Ministry of Labor and Social Security (MTSS). Local representatives of the company were present, as well as company authorities from China.

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The decision involves dismissing some 60 workers who had been on strike for the past three years, reported the San José newspaper Primera Hora on Wednesday.

The company will have to pay around US$ 600 thousand for this concept but, according to Lifan’s statement to the MTSS, it only has around US$ 100 thousand for the payment of wages. This point caused surprise in the union because since 2018 and to date, the liquidations of another 60 workers have been made normally.

In that line, the company announced that it plans to hold an auction of machinery, spare parts, and merchandise in the industrial plant in November to raise funds. According to Villafan, these goods are worth between US$ 1 million and US$ 1.5 million.

A few days ago, a workers’ assembly decided to accept the US$ 100 thousand on the account and to set a date for the rest of the payments to be made. This will be discussed at a new meeting scheduled for the next few hours at the MTSS. According to El Observador, it is expected that the company will officially communicate to the personnel the withdrawal from the country and the reasons for the decision on Friday.

“They had never talked about leaving the country regardless of the difficulties in the region. And it was worse when they told us that they did not have all the assets to pay us. In an auction, we depend on a third party. If everything is not sold, what do we do?” said Villafan. In this context, the workers’ union is planning to ask the Minister of Labor, Pablo Mieres, for a new extension of the unemployment insurance until it can get all the money for the dismissals.

On the other hand, industry sources told El Observador that the Chinese automaker added the Geely group as a partner last year and that the decision is related to the restructuring and new business plans focused on repositioning the brand in the electric vehicle segment.

A HISTORY MARKED BY PROBLEMS IN BRAZIL

Lifan’s plant in Uruguay, inaugurated in 2011, halted its production in mid-2018 due to the loss of competitiveness in the Brazilian market, the leading destination of its exports. At the beginning of 2019, it communicated its decision to stay in the country while waiting for an upturn in regional demand and to negotiate an agreement with assemblers of other brands.

Even at the end of 2019, the automaker closed a strategic alliance with Brilliance Auto, which intended to strengthen its vehicle brand in the region by producing from Uruguay to bet on commercialization in the Brazilian market.

The possibility of assembling electric cars was also discussed, and some of the company’s employees were even trained in this direction. But with the pandemic, none of these plans prospered.

Before the first temporary closure of the plant in 2015, after the collapse of the Brazilian market, Lifan reached an annual production of 6,400 vehicles. The Route 1 plant returned to operation in 2017 with a yearly target of 1,700 cars. Finally, in August 2018, it closed its doors, hit by competitiveness problems and declining sales. At its peak and before several restructurings, it reached nearly 400 workers in its workforce.