Fiat Auto SpA is seeking an agreement with Brazil's metal workers union to reduce production and inventory, after sales fall 7.5% in June. The Italian automaker is proposing to split the 30-day workers' vacation into three 10-day vacations until Jan. 31.

If the union fails to agree, Fiat would be obliged to dismiss workers, says Osmani Teixeira de Abreu, director of labor relations. Fiat sales fell in June, but production remained at the same level as in the first months of the year, at 1,980 units per day. Fiat has cut overtime and Saturday work and granted 10-day vacations for 5,000 workers. Even so, the company's inventory level remains high, with 12,000 surplus cars at the end of June, as opposed to the usual 3,000 to 4,000 units. Dealers have another 28,000 units, compared to 22,000 during the first six months of the year.

Marcelino da Rocha, head of the metal workers union of Betim, Minas Gerais, says that Fiat fired an average of 35 workers per month in the year's first half, and 45 workers in July. Fiat has 8,200 workers on its production line and 2,200 more in Powertrain, a joint venture between Fiat and General Motors Corp.