SAO PAULO, Sept 26 (Reuters) - Brazilian planemaker Embraer SA confirmed on Monday that it would cut nearly 8 percent of its workforce through a voluntary buyout program, slashing costs amid weak business jet sales and downsized defense contracts.
Embraer accepted the resignation of 1,463 employees, effective next week, out of 1,470 who volunteered for the buyouts, according to a statement from the company.
Union leaders said last week that nearly half of the workers leaving are metalworkers on Embraer’s assembly lines in Sao Jose dos Campos, about 60 miles (100 km) outside of Sao Paulo.
The job cuts, along with furloughs starting next month, will help bring down labor costs that rose along with double-digit inflation in Brazil last year, hurting profitability as demand flagged in two of Embraer’s three main segments.
Embraer’s defense unit, its fastest-growing division just a few years ago, has been forced to scale back major programs as a federal budget crisis hit military spending. The planemaker also cut its target for executive jet sales this year on weak demand.
The layoffs at Embraer, coupled with deep job cuts by carmakers and other manufacturers, underscore how unemployment in Brazil is still climbing two years into a severe downturn, sapping the strength of an expected recovery.
Embraer shares fell 3 percent in midday trading in Sao Paulo, contributing to a 1 percent drop for the benchmark Bovespa stock index.
Newspaper O Globo reported over the weekend, without citing sources, that Embraer was preparing a potential sale of its defense unit, which the company “vehemently” denied in a statement.
Traders said there was little connection between the share move and the prospect of a defense deal, which BTG Pactual analysts called unlikely in a morning note to clients.
Embraer is designated a strategic defense business by the Brazilian government, which holds a so-called golden share that gives it a veto over strategic decisions such as “the creation and/or alteration of military programs,” according to the company. (Reporting by Brad Haynes; Additional reporting by Bruno Federowski; Editing by Paul Simao)