April was the second-best April in Brazil's automotive history, with vehicle production totaling 168,000 units, up 24.1% over the same month last year. Compared with March, however, production dropped 8.3%.

Brazil's automakers group, Anfavea, says the record for production was set in April 1997, with 194,000 units. Brazil's automakers in April sold 135,519 cars, buses and trucks, for a four-month total of 499,332 units, or 28.4% over the same period last year. Although April sales fell 7.2% compared to March, they were up 30.5% from the same month last year.

But trouble is brewing. Increasing inflation and energy rationing due to a drought in the hydroelectric power plant regions may affect projections of 1.9 million vehicles produced this year.

Herbert Demel, president of Volkswagen in Brazil, recently told the Brazilian government that as a last resort his company would transfer its operations to other countries if the government could not guarantee electric energy. But parent VW AG says it plans to stay in Brazil.