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30 Jul, 2009 06:01

Avtovaz denies cuts as woes mount

Russia’s biggest car maker, Avtovaz, has denied media reports that it plans to cut more than 27 thousand jobs. However the company has been struggling with falling demand, and is facing problems debt with debt.

Car sales in Russia have dropped 55% so far this year. And Russian brands have done worse than foreign names assembled in the country.

The slump in sales has led to storage facilities filled with cars. Russia's biggest carmaker, Avtovaz, is struggling to survive after a 60% drop in production and a 44% fall in sales.

In the first six months of 2009, 140,000 cars were build and sold by its Togliatti factory. Another 40,000 were sold from storage.

Sevastian Kozitsin, Analyst at Broker Credit Service, says cutting staff is the only thing that can keep the company from closing its doors for good.

‘For Avtovaz now, the question is to survive or not. Cutting 50% of the staff will be good for the enterprise’

The company has already agreed to suspend production in August and cut the working week in September.

Earlier this year the car giant received government support of more than $3 billion dollars. That came from state banks and the corporation for supporting Russian organizations – Rostechnologii.

But it looks unlikely that will give Avtovaz much more than a breathing space.