Russia car giant Avtovaz braces for mass job cuts

Russian car giant Avtovaz could cut a quarter of its 110,000 workforce amid plunging sales, reports said Tuesday, underlining the severity of the economic crisis in Russia's auto sector.

Avtovaz vice president Igor Komarov announced a plan to cut 27,691 jobs at a meeting with suppliers, the Interfax news agency said, citing company sources.

The group however denied that job cuts had been announced at the meeting and reaffirmed its commitment to preserving its workforce.

"This information does not correspond to reality," it said in a statement emailed to AFP.

"Igor Komarov did not announce any intention on the part of the company to reduce staff. The leadership expressed its engagement to preserving the labour collective under the current conditions."

It did not give further details over the contents of the meeting.

The meeting was attended by former Avtovaz chairman Vladimir Artyakov, now the governor of the central Samara region where the firm is based and which is hugely dependent on the carmaker's wellbeing.

According to Interfax, the company currently employs 110,000 workers and if confirmed the job losses would be among the biggest at a single company in Russia's current economic crisis.

The RIA Novosti news agency said that the company was examining the option of cutting 25 percent of its workforce but that no final decision had been taken at Tuesday's meeting.

"Komarov said at the meeting that if current production and sales continue job cuts of more than 27,000 employees are possible," a source told the agency.

"I emphasise that this was brought up as a potential development of events and not as a concrete decision which has been taken," it added.

According to Interfax, Komarov announced that the company was now aiming to produce only 332,000 units for 2009 after producing 210,000 in the first half of the year.

The reports were the latest bad news for the Russian auto industry, which until last year had excited investors as the fastest growing car market in Europe but has been hit by a plunge in domestic demand.

The company, which is 25 percent owned by French carmaker Renault, has already said it will suspend production for the month of August in response to falling sales, the second such move this year.

Avtovaz in early July reported a net loss for last year of 24.7 billion rubles (563 million euros, 799 million dollars) after a profit of 3.7 billion rubles in 2007.

The Russian government in late March said it would provide the struggling group with a loan of 25 billion rubles.

Avtovaz, which was set up with Italy's Fiat in the Soviet era, is the key employer in Tolyatti, a city of 700,000 people on the Volga River in the Samara region that was named after an Italian Communist leader.

Russian unemployment has been steadily climbing amid the economic crisis, which suddenly brought an end to the best half-decade of growth in the country since the collapse of the Soviet Union.

There have been occasional expressions of social discontent which were almost unheard of until the crisis and the government has said it is acting to prevent major outbursts of unrest.