Workers at Volkswagen's Brazilian plant at Sao Bernardo do Campo near Sao Paulo began an open-ended strike Tuesday to protest 800 layoffs, their union said.
A union statement indicated that those dismissed had been informed "by letter that they would not be returning to their posts after the holiday period" while adding a further 1,300 jobs were under threat.
Union general secretary Wagner Santana indicated during a union general assembly which saw the strike ballot passed that a 2012 accord did not permit "unilateral" job cuts.
Volkswagen said in a statement that Brazil's auto market, the world's fifth largest, had endured two years of falling growth which had taken a heavy toll on the balance sheet, notably affecting the Anchieta plant at Sao Bernardo do Campo which employs 13,000.
Falling domestic sales and exports in 2013 saw production nosedive 15 percent, the firm said.
Volkswagen added it had tried to obtain union support for proposals designed to cut staffing with measures including imposing the collective taking of holiday time or the temporary suspension of contracts. But the firm insisted such measures were "no longer sufficient" in the current climate.
Earlier Tuesday, Brazil's auto dealership association Fenabrave announced car sales in the world's seventh largest economy slumped 7.15 percent last year to 3.5 million units, the sector's worst showing in five years.