UPDATE 1-Brazil auto sales slump, gov't to offer credit

Thu Nov 6, 2008 9:28am EST
SAO PAULO, Nov 6 (Reuters) - New automobile sales in Brazil fell sharply in October, hurt by a severe retraction in the availability of credit due to the global financial crisis, the national automakers' association Anfavea said on Thursday.
Sales of new cars and trucks slumped 11 percent from September and 2.1 percent on a year-on-year basis, to 239,200 units. Sales had jumped 9.8 percent in September from the previous month, rebounding from a 15 percent drop in August.
Production of cars and trucks dropped in October for the third month in a row, slipping 1.3 percent from September to 296,300 vehicles. Output had fallen 4.3 percent in September and 1 percent in August.
The slowdown follows three years of torrid growth in Brazil's auto market, which has benefited from a credit boom that helped fuel a surge in consumption. But the availability of credit has shrunk dramatically in the last two months as the global financial crisis has spread.
Brazil's government has instructed state-run bank Banco do Brasil (BBAS3.SA: Quote, Profile, Research, Stock Buzz) to make available a total of 4 billion reais ($1.86 billion) so that automakers' financing units can increase lending and spur sales, Finance Minister Guido Mantega said on Thursday.
"With these resources, we're ensuring that there will be enough financing available for the automobile industry to maintain sales in November and December," Mantega said in a speech to business leaders in Brasilia.
Brazil has become a crucial market for global automakers such as Italy's Fiat (FIA.MI: Quote, Profile, Research, Stock Buzz), Germany's Volkswagen AG (VOWG.DE: Quote, Profile, Research, Stock Buzz), U.S.-based General Motors Corp (GM.N: Quote, Profile, Research, Stock Buzz) and Ford Motor Co (F.N: Quote, Profile, Research, Stock Buzz). Asian and French manufacturers are also beefing up their presence in Brazil, Latin America's largest economy.
Despite the drop in October, car and truck sales have risen 23.4 percent so far this year, totaling 2.45 million units. Anfavea expects sales to rise 24.2 percent this year, to 3.06 million units.
Production is up 17.6 percent this year, totaling 2.92 million units. Anfavea forecasts a 15 percent increase in output in 2008, to 3.425 million units. ($1=2.15 reais) (Reporting by Alberto Alerigi Jr. in Sao Paulo and Ana Nicolaci da Costa in Brasilia, Writing by Todd Benson)