Russian Car Company Avtovaz to Cut 27,600 Jobs

Russia had the fastest growing car market in Europe up until last year but was then plunged into crisis by the slump in domestic demand.

Russia's largest carmaker Avtovaz announced mass layoffs on Sept. 24 of 27,600 jobs as the maker of the popular but much-derided Lada struggles with sliding sales due to the economic slump.

"Today, 102,000 people work at Avtovaz. Such a number cannot guarantee effective and profitable production, therefore we have agreed to reduce the personnel by 27,600 people," the carmaker said.

The intended cuts therefore represent more than one quarter of the workforce at the company, which is 25% owned by Renault. "In all, no more than 27,600 employees will be laid off," it said, adding that this figure included cuts of 5,000 white-collar jobs announced last week.

Russia had the fastest growing car market in Europe up until last year but was then plunged into crisis by the slump in domestic demand.

With huge amounts of unsold stock, Avtovaz has imposed month-long production halts at its Volga region factory after the crisis hit its market share which was already under pressure from swankier foreign imports.

The downsizing corresponds with a lower annual output target of 500,000 cars per year, keeping Avtovaz's plant in Tolyatti working at 65% capacity. Avtovaz president Igor Komarov met on Sept. 24 with the companys main trade union to discuss the plan to reduce the workforce to 75,000, the company said.

Detailing the layoffs, it said 13,000 employees would retire with pensions from September to October this year, while another 5,500 will be asked to take early retirement. Another 9,100 employees would be discharged, 6,000 of whom would have the option to work at Avtovaz again in 2012.

The announcement capped a black month for Russia's labor market as statistics showed production still declining in Russia's once-booming industry.

Reports last week said the country's number two carmaker GAZ plans to slash 14,000 jobs by the end of the year at factories in its Volga River base of Nizhny Novgorod.

The survival of both car-making giants, which once together dominated the Soviet car industry, is not only a matter of national prestige but a top policy issue for the Kremlin amid worries over unrest at factory towns.

Avtovaz, also part-owned by state conglomerate Russian Technologies, is the key employer in Tolyatti, a city of 700,000 on in the southern Samara region.

Moscow earlier this year coughed up 25 billion rubles (US$830 million) in interest-free loans to keep Avtovaz afloat and four billion rubles (US$132 million) in state aid to GAZ.

GAZ, the maker of the Volga sedan, has also been mooted as a possible partner of the Canadian-Russian consortium which is seeking to buy GM's European unit Opel.

Before its export and hydrocarbon-dependent economy was thumped by crisis, Russia had enjoyed half a decade of stellar growth culminating in growth of 8.1% in 2007. But figures released by the state statistics office last week showed industrial output down 12.6% in August from the same month in 2008 largely due to production halts at the top carmakers.

Copyright Agence France-Presse, 2009

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