World Economy

Russia’s Carmakers Begin Layoffs

Russia’s Carmakers Begin LayoffsRussia’s Carmakers Begin Layoffs

Russia’s automotive industry leader AvtoVAZ has launched a layoffs campaign. The staff of managers, specialists and office workers will be downsized by 2,200.

“The company’s divisions have drafted new staff charts. The positions to be cut and the names of employees to get dismissal notices will be decided accordingly,” Itar-Tass quoted the chief of the trade union local, Sergey Zaitsev as saying.

At the end of December 2013 AvtoVAZ had a workforce of 65,800 (including 50.6% of blue collar workers). Toward the end of 2014 the personnel is expected to shrink to 53,000. The current personnel optimization is expected to slash costs. According to the Association of European Businesses Russia’s automotive market slumped 12.1% in January-August 2014. A total of 1,582 million new cars were sold in that time - 217,000 less than in January-August 2013. The production of cars reduced by 4.6% in contrast to the same period last year to 1.2 million. The sales of AvtoVAZ’s Lada cars plummeted by 32% in August in annual terms.

 Shorter Working Hours

Russia’s other automobile manufacturers have been reducing personnel, too. The General Motors plant in St. Petersburg will be working one shift a day instead of three as of October 1. Ford in Vsevolzhsk, the Leningrad Region, and Volkswagen, in the Kaluga Region, too, have declared they will be working shorter hours.

There has been a slump in the market of many popular makes and models. In August alone Chevrolet sales were down by 50%, Ford, by 57%, Daewoo, by 58%, Suzuki, by 58% and Peugeot and Geely, by 56%.

Russia’s auto market shows no signs of improving in the next two years having been hit by an economic slowdown and weak rouble, the head of Ford Motor Co’s Russian venture told Reuters.

Sanctions over Ukraine have hurt the Russian economy, hitting car sales to a growing middle class while imported car parts have become more expensive.

“There is no sign that things will rapidly improve in the next two years,” said Ted Cannis, CEO of Ford Sollers, a 50-50 joint venture between Ford and Russian carmaker Sollers.

“To improve the car business, we need interest rates to come down, we would need more certainty in the business climate and the customer climate,” Cannis said in an interview at the Reuters Russia Investment Summit.