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Massive sackings at Russia's largest carmaker

January 27, 2014, 15:53 UTC+3 Alexandrova Lyudmila
© ITAR-TASS/Andrey Kholmov

MOSCOW, January 27. /ITAR-TASS/. Russia's largest carmaker, AvtoVAZ, has announced massive job cuts. Production workers and office personnel totaling 7,500 - more than 10% of all employees - will lose their jobs in a move blamed on falling sales and the need to reduce manufacturing costs. Experts warn that other Russian industrial giants may do the same while the unemployment rate begins to climb.

AvtoVAZ disclosed its plans on Thursday, saying that this year will bring dismissal for 5,000 production workers and 2,500 office staff.

New AvtoVAZ president from Sweden Bo Andersson, officially named chief executive on January 14, signed the decree on personnel lays-off. Andersson had earlier headed the Russian carmaker GAZ, where he also showed himself to be a tough manager. Under him, around 50,000 people from 118,000 on the payroll were fired at enterprises incorporated in the group.

The initial goal is to make the company profitable despite the current state of the Russian market, Andersson told a meeting with managers and representatives of the company’s trade union.

Andersson was named CEO amid the decline in company sales - the number of Lada models sold falling 12% on 2013 while car sales dropped only 5% in Russia overall. The last round of sackings came at AvtoVAZ in 2009-2010, when staff were cut by 30,000 though an additional 24,000 jobs were created in VAZ subsidiaries.

Experts say dismissals at the carmaker's plant in Togliatti, a city in the middle reaches of the Volga River, are justified, but warn that large-scale cuts are dangerous for the Russian labor market.

“Dismissals will not affect progress of developments or volume of production. Moreover, renovation of car models and production modernization require fewer jobs,” VTB-Capital analyst Vladimir Bespalov told the electronic news edition “As Andersson was distinguished as GAZ CEO, he can also make AvtoVAZ’s operation more efficient successfully,” he said.

Large numbers of dismissed workers do not create problems for the city of Togliatti, Rossiiskaya Gazeta daily cited director of the Center of Structural Research of the Gaidar Economic Policy Institute Alexei Vedeva as saying. This is a big city and its economy can employ laid-off workers easily and without making the social situation worse, the expert believes.

“Meanwhile, sweeping lay-offs are quite dangerous on the current labor market,” he noted. “The problem is that the domestic market of labor resources is characterized by low mobility and a low inclination to change specialty. People did not get accustomed to changing profession and do not want to move to another city, Vedeva said.

But these problems can and should be settled. “In general, Russia is witnessing manpower deficit, but the unemployment rate is at its historical maximum now. These are good prerequisites not to change too painfully the idea of people about new vocations and work in other neighboring regions,” he noted.

Meanwhile, latest reports from Russia's State Statistics Service made public last Friday showed that a clear-cut tendency for unemployment growth had been observed since the second quarter of 2013. In December 2013, 78,000 people lost their jobs. This figure reached 5.6% of the economically active population and keeps growing. The number of employed people fell by 632,000 (0.9%) and the unemployed figure went up 365,000 year-on-year in 2013.

“Not many new jobs are created in the country and amid slower economic growth, unemployment rise will be propelled by optimization measures in major corporations, at which swollen staffing has been retained for quite a long time in favor of social stability,” Kommersant daily quoted chief scientific fellow of the Russian Presidential Academy of National Economy and Public Administration Alexander Polyakov as saying. If AvtoVAZ’s firings take place without any strikes, so, without any sanctions or restrictive measures towards AvtoVAZ, other Russian production giants will follow suit, the expert believes.

However, state authorities take the situation in a rather optimistic way. “Our unemployment situation is the calmest in modern developed economies - European, Asian and American,” Prime Minister Dmitry Medvedev told a meeting with students last Friday. “It is very low against the world level,” he said.

Experts do not expect any hikes in the unemployment rate. State authorities pledge to follow the situation and propose financial support to those who are prepared to leave cities where most people work for a single local employer, and promise money to develop small business ventures for those staying.


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