Drop In Demand Leads To Layoffs In Russia's Auto Market

Jun 10, 2015
Originally published on June 10, 2015 7:01 am
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And officials in Russia have been sounding more optimistic about that country's financial crisis. They say the economy may have already passed through the worst of the slump brought on by low oil prices and Western sanctions. Possibly, but if Russia's auto market is any measure, the economy faces a long and difficult road ahead. NPR's Corey Flintoff has that story from Moscow.

COREY FLINTOFF, BYLINE: A few years ago, Russia was one of the most lucrative car markets in the world. Foreign automakers made investments, like this Ford plant near St. Petersburg, where thousands of people assemble the Ford Fiesta and other popular models. But the economy stumbled after Russia annexed Crimea last year. The auto market tanked, with new car sales falling by 42 percent in April, the lowest level in more than a decade. The production lines slowed, and many stopped. The slump hit hard in industrial regions such as Kaluga, southwest of Moscow, which used to be one of the most successful regions in attracting foreign investment. Dmitry Kozhnev is the founder of an auto workers union, the Interregional Workers Association.

DMITRY KOZHNEV: (Through interpreter) The situation in Kaluga is very serious. It's alarming. Take Volkswagen; their production has dropped by almost half. It's the same with the other big carmakers here, Peugeot, Citroen and Mitsubishi.

FLINTOFF: The drop in production has meant widespread layoffs at the auto plants and at the related factories that make tires and other parts. Kozhnev says the union's been able to protect its members' jobs at Volkswagen, where it has a strong contract, but not at other plants where the union was just starting to organize. Now that times are tough, Kozhnev says the authorities are cracking down on labor unions out of the fear that they'll drive foreign business away. He cites a recent police raid on a union organizing meeting.

KOZHNEV: (Through interpreter) All of us were detained. It was a special operation by 40 cops armed with machine guns. They took us to the station, took mug shots and fingerprints - just like in the movies.

FLINTOFF: Kozhnev says his members are routinely watched by a police anti-extremist squad. The region around St. Petersburg is another big hub of automaking, and it too has been hit hard by the financial crisis. General Motors said recently that it will idle its St. Petersburg factory and stop production of its Opel brand in Russia altogether. The layoffs have led to more labor disputes, but union official Pyotr Prinyov says the unions aren't faring well. Workers recently had to abandon a strike they had started at the Ford plant in March.

PYOTR PRINYOV: (Foreign language spoken).

FLINTOFF: Prinyov says Ford simply brought in nonunion workers to replace the strikers and cut hours to as little as two days a week. Ted Cannis is the CEO of FordSollers, Ford's Russian partnership. He says the company has had to lay off workers, but it was better to cut hours to keep the remaining jobs.

TED CANNIS: This is a difficult time for us, or the competition, to be increasing pay and when we're trying to hold onto everybody's job the best we can and make it through the crisis so we can all come out better on the other side.

FLINTOFF: Pyotr Prinyov, the union official, says one problem is that foreign carmakers aren't really committed to Russia. When times get tough, he says, they shutter their operations and cut workers loose. Ted Cannis says that's not true; Ford's investments in Russia are too big to abandon.

CANNIS: I would say by the end of this year, we'll invest about a billion and a half over the last four years.

FLINTOFF: Cannis is optimistic the Russian economy can bounce back. But like many business people here, he thinks that process could take up to two more years. Corey Flintoff, NPR News, Moscow. Transcript provided by NPR, Copyright NPR.