Russia's Lada Carmaker Halts Production

March 4, 2009
The company, which is 25% owned by Renault, said it had to shut its main conveyer belt due to problems with parts suppliers.

Avtovaz, Russia's biggest auto plant famed for its Ladas , was forced to shut its main production line on March 3 amid financial troubles, the company said.

Reflecting the seriousness of the crisis at Avtovaz and its home town of Tolyatti, Health and Social Development Minister Tatyana Golikova told parliament 3,200 workers were to be laid off at the factory. Another 12,500 workers have been put on leave, she said.

The carmaker, which was set up with Italy's Fiat in the Soviet era and is now 25% owned by Renault, said it had to shut its main conveyer belt due to problems with parts suppliers. Due to economic conditions, the company had asked suppliers to accept promissory notes instead of money for the majority of payments.

"Avtovaz's main conveyor belt was stopped on March 4. The reason was a halt in supplies" from main parts producer SOK, the company said. "Negotiations are under way on restarting deliveries," the statement said. Avtovaz chairman Boris Alyoshin said the company was making only 30% of its payments to suppliers in money and the rest by promissory note.

Russia's no-frills car manufacturers were helped in surviving the Soviet transition period by low prices and ease of access to spare parts. But they have been hit hard by the current crisis at a time when many foreign companies have set up manufacturing inside Russia.

A similar stoppage shut down production in early February, putting in doubt thousands of jobs at the company.

Prime Minister Vladimir Putin has thrown his weight behind Russia's flagging car industry. On a visit to a truck maker in December, Putin said foreign imports were "absolutely inadmissible" in a time of crisis. Import duties on cars have been raised and the state has introduced subsidies for credit on car purchases. State institutions have been instructed to buy only Russian-built cars.

However the Interfax news agency noted such measures had been ineffective. "Of all Russia's car makers, Avtovaz can count on most state support. All its models are covered by the system of state subsidies for auto credit," it said. But even such serious financial support and the reduction of competition by increased tariffs on imported cars have failed to revive the Russian giant."

In an interview with Echo of Moscow radio station, a union leader voiced the discontent in Tolyatt. The Unity trade union had "offered to create anti-crisis committees with the participation of trade unions so as to control the use of finances provided to the company by the government.... But neither the government nor the employers want to listen," said union leader Pyotr Zolotarev.

The deputy chairman of Russia's Alfa Bank, which has been involved in resolving the dispute with suppliers, voiced concern about the situation in the city. Avtovaz's problems are a of a state character. This is a city built around a factory, a city of 700,000 people.... This is a very active and sickly socio-political point on the Russian map," Oleg Sysoyev told Echo of Moscow.

Copyright Agence France-Presse, 2009

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