Weakening Rouble Makes GM Cut Production and Cut Jobs in Russia

Published Date : Sep 17, 2014

Opel Group, the European subsidiary of general Motors has planned to cut production and shed nearly 500 jobs in Russia. The decision comes ahead of the weakening Russian rouble and the drop in local demand due to slow economic growth and Western sanctions.

Opel stated that it would cut production from two shifts per day to one, at its St. Petersburg plant where it produces Chevrolet Cruze compact and Opel Astra.

The company will also offer voluntary severance letters to nearly 500 of the plant’s 2000 employees. Opel also plans to accelerate a decision of shifting to more of local suppliers in an attempt to cope with the weakening Russian currency.

Russian rouble is this year’s biggest declining currency amongst major currencies of the world. It’s value observed a reduction of 15% against the US dollar on Tuesday, to reach a new low in the past years.

The Ukraine crisis has also led to many issues in regard to western sanctions, causing further strain to condition of carmakers in the country.

Analysts estimate that the free fall of demand will hit almost all carmakers in the country. Production of passenger cars could reduce by 14% in this year, to 2.4 million vehicles. The decline could further worsen by 6.5% in 2015 to reach production value of 2.24 vehicles. However, the conditions could rebound by the end of 2016, analysts estimate.
Only by the end of last year, Russia was the third biggest market for General Motors after UK and Germany. At this moment, however, the market is caught amid severe upheavals.