Hundreds yesterday took to the streets of Tolyatti, home to Russia's largest carmaker Avtovaz, to protest mass layoffs at the ailing manufacturer and demand that its management steps down.

Yesterday's officially sanctioned demonstration is the latest in a series of protests to shake the bleak company town of 700,000 people on the Volga River in central Russia and comes as the struggling carmaker is gearing up to lay off thousands.

"A social catastrophe will happen in the city if the plant is shut down," Alexander Rasskazov, an Avtovaz worker, said at the protest.

At the end of the two-hour demonstration organised by the carmaker's independent trade union Yedinstvo (Unity), the protesters adopted a resolution calling for the resignation of the company's management as well as a pay hike.

The demonstrators carried red flags and placards with slogans such as 'No to Avtovaz bankruptcy' and 'Those who will shut down Avtovaz will not be loved by us'.

Trade unionists put the turnout at 1,500 people, while police told reporters about 700 people showed up. Russia's state-controlled television largely ignored the demonstration.

While officials have said the country's economy is slowly recovering from the crisis, the government remains on tenterhooks as mass layoffs and protests could yet spill into wider social unrest.

Tolyatti is one potential flashpoint, where life has revolved around Avtovaz for the past 40 years.

Analysts have said Avtovaz, with its bloated workforce, focus on manual labour and equipment dating back to the 1970s, is dying a slow death, despite all attempts by the government to shield it from foreign competition.

In 2005, the Kremlin handed officials at state arms trader Rosoboronexport led by Prime Minister Vladimir Putin's powerful ally Sergei Chemezov, the task of turning the carmaker around.