US carmaker General Motors is cutting production and shedding around 500 jobs at its Opel division in Russia, hit by a plunge in local demand due to a slowing economy and Western sanctions.
Opel said yesterday it would scale back production at its plant in St Petersburg to a total of 16 days during the three-month period from August to October.
It will also offer voluntary severance packages to about a quarter of the plant’s 2,000 staff and accelerate a move to use more local suppliers – a shift that will help it to cope with a weakening Russian rouble.
Auto sales have slumped in Russia this year as slowing economic growth is causing people to put off purchases.
Western sanctions over the crisis in Ukraine and the devaluing rouble are causing further strains to carmakers. The rouble is this year’s biggest-declining major emerging currency, having lost more than 15 per cent in value.
Russian passenger car sales tumbled 23 per cent in July alone, extending their year-to-date drop to almost 10 per cent.
General Motors (GM) is one of the foreign carmakers most exposed to Russia. Its share of the local market shrank to 7.8 per cent in January-August from 9 per cent a year ago.
“Russia was our third-biggest market last year after the UK and Germany,” Opel chief executive Karl-Thomas Neumann said.
Russia’s top automaker Avtovaz said last month it would cut production of its Lada cars by 25,000 vehicles between September and November, though workers would continue to get their full salary.
Volkswagen, Europe’s largest automotive group, said earlier this month it would suspend production at its Kaluga factory in Russia for 10 days from September 8, while keeping to longer-term expansion plans.
GM said it would move to one-shift operations at St Petersburg where it builds the Opel Astra and Chevrolet Cruze compact models.
Opel also said it aimed to purchase 60 per cent of all parts locally to alleviate cost pressures in St Petersburg.
Russia was ourthird-biggest market last year after the UK and Germany
“Demand has been in free fall recently, none of the carmakers producing in Russia will be able to escape output cuts,” said Tatiana Hristova, analyst at market research firm IHS Automotive.
Production of passenger cars and commercial vehicles weighing up to six metric tons may slump 14 per cent this year to 2.4 million autos, declining a further 6.5 per cent in 2015 to 2.24 million before rebounding in 2016, Hristova forecast.
Restructuring at Opel will also involve changes in senior personnel. Susanna Webber, head of purchasing and logistics, will take the helm of Opel’s Russian operations with immediate effect, to be assisted by new vice president Andy Dunstan, who previously was the carmaker’s managing director in the country.
Still, Opel’s planned investments in parent GM’s joint venture with Avtovaz will not be affected by the changes, Neumann said.
“We believe in the long-term potential of Russia but volume and prices are under strong pressure and the rouble keeps devaluing. We’re now taking steps to minimise the risk and stay on course,” he said.