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24 Sep, 2009 15:58

Avtovaz slashes workforce by 25%

Russia's largest carmaker, Avtovaz, plans to lay off 27,600 workers in an attempt to stay afloat.

The company, announced on Thursday that it had reached agreement with trade union leaders on Wednesday to reduce the workforce because it was operating only one shift and at only 65% of capacity. Thursday’s statement baldly noted “Lowering personnel numbers in such a situation is essential,” after press reports in Russia suggested it was looking to shed more than 36 thousand workers. Among those facing redundancy are 5,000 senior managers and specialists, with the company saying that the layoffs would include 13 thousand pensioners, expected to leave the company in October, and 5500 employees nearing retirement age. Avtovaz noted that, among the 9 thousand younger employees to lose their jobs, as many as 6 thousand may return when the company launches a joint project with Renault in 2012.

The Russian carmaker which has become closely linked with both Renault and Nissan after the French carmaker bought a 25% stake, has been fending off the major inroads made into the Russian carmarket by global producers over recent years. With car sales in Russia plunging in the wake of the economic downturn this year, its price advantage over international rivals hasn’t translated into increased market share.

Thursday’s announcement comes after auditors warned about Avtovaz’s viability as a going concern and its ability to continue servicing more than $1.7 billion in debts. It has previously cut wages in order to receive an interest free $800 million loan from the government, with the company believed to be seeking further state support.

According to Patrick Fullick, president of Science Connections, “The problem for Avtovaz is that it’s a company that is producing cars that, frankly, nobody wants to buy anymore.”

”It’s not a problem that affects Russia alone: carmakers across the entire world are feeling the pinch,” Fullick went on.

However, he added, Avtovaz is now in a very competitive environment since foreign carmakers have come into Russia. “The share of the auto market that’s taken by foreign carmakers has now risen to 35%. And that’s a real problem.”