Russian Avtovaz car plant workers return to work

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Avtovaz workers at Russia's largest carmaking plant have been returning to work after walking off the job on Wednesday morning in support of a wages and conditions claim.

The workers had demanded they be paid $US 1000 per month, and gave management until the start of August to agree.

The Wednesday morning shift walked off the job at about 1030 local time (0530 GMT). Workers stayed off the job until the end of the morning shift, but the afternoon shift proceeded as normal.

The management denies that the incident was a strike, and has threatened the workers for what it calls a breach of working regulations.

In the short term we believe that it can provide a positive effect for Avtovaz market itself, because there are a lot of talks and production hold for some period of time will help Avtovaz to sell some of its stocks on the market. However, for sure, in the middle and long-term that will be a negative effect. Firstly, you do not know what the outcome of the strike will be. If people get their wages increased they demand, for instance, if you assume that 10,000 people will get such a wage promotion, you will end up with nearly $US 200 increase per each car in terms of the price. Given a very stiff competition of Avtovaz with foreign car makers it would be a dangerous move. It will be a very big threat for Avtovaz in the future,

Kirill Chuiko, an analyst of the Uralsib Financial Corporation, Moscow

Avtovaz is Russia largest domestic car manufacturer with the Togliatti plant producing nearly a million cars per year.

Despite the boom in the Russian auto market, sales of Avtovaz's Lada cars are on pace to fall 20% this year.

In recent years the company has been plagued by management and ownership issues which saw Rosoboronexport take control of the automaker in 2005.

It currently has a joint venture with General Motors and is in talks with Renault. But in recent years the company has been hit by the collapse in sales of Russian domestic models in the face of increased competition from foreign automakers.

Analysts say that Wednesday's events may enable the company to benefit in the short term, but that it may lead to significant long term consequences.

“In the short term we believe that it can provide a positive effect for Avtovaz market itself, because there are a lot of talks and production hold for some period of time will help Avtovaz to sell some of its stocks on the market. However, for sure, in the middle and long-term that will be a negative effect. Firstly, you do not know what the outcome of the strike will be. If people get their wages increased they demand, for instance, if you assume that 10,000 people will get such a wage promotion, you will end up with nearly $US 200 increase per each car in terms of the price. Given a very stiff competition of Avtovaz with foreign car makers it would be a dangerous move. It will be a very big threat for Avtovaz in the future,” commented Kirill Chuiko, an analyst of the Uralsib Financial Corporation, Moscow.

Troubled car maker could be sold through Rosoboronexport to Russian businessman Oleg Deripaska who might re-organize it to Western-type structure.