GM to invest $2.8 billion in Brazil over five years, Barra says

UPDATED: 8/14/14 3:16 pm ET - adds details

BRASILIA (Reuters) -- General Motors Co. will invest 6.5 billion reais ($2.8 billion) in Brazil over the next five years, CEO Mary Barra said today.

Speaking to reporters in Brasilia after meeting President Dilma Rousseff, Barra said the new investment will be spent on new products, technology and maintaining plants. She said there were some mid-term challenges ahead, but that GM was committed to one of its most important markets.

Brazil's auto industry, which makes up one-fifth of the country's manufacturing output, has slashed production by 16 percent in the first seven months of the year as the economy declines.

GM and a metalworkers union outside of Sao Paulo are at loggerheads over plans to place some employees at a local factory on paid leave. The union has said the plans could threaten the jobs of 1,000 workers.

The union said later today it will hold GM to the promise of increasing investment at its Sao Jose dos Campos plant. At a press conference, Barra did not mention labor issues.

Barra said she thanked Rousseff for tax incentives for automakers and improved credit conditions in Brazil. 

Despite tax breaks, automakers are reducing payrolls in one of the world's largest car markets as demand for new vehicles tumbles. Germany's Volkswagen AG put 900 workers in Brazil on paid leave in May and France's PSA Peugeot Citroen SA started a voluntary leave program for workers in Rio de Janeiro state that same month.