R i g h t a r d i a: GM and Ford suspend operations in Russian plants

Wednesday, July 1, 2009

GM and Ford suspend operations in Russian plants

Dmitry Medvedev, Russia's president, right, visited GM's assembly plant in November [EPA]

General Motors and Ford, the US car manufacturers, have suspended operations on their production lines in Russia.

The move comes as the deepening global economic crisis squeezes Russian consumers' demand for new cars.

GM said its brand new plant outside St Petersburg would halt manufacturing until August 31.

"Having carefully studied the state of the Russian car market and the extent of reduction in the demand from the creditworthy population, we have decided not to force a production increase at our Russian plant this year," Chris Gubbey, GM Russia's president, said in a statement.

The company said no major layoffs would occur among the plant's 1,000 employees, though it was unclear whether that might signal smaller-scale cutbacks or unpaid temporary leaves of absence.

Dmitry Medvedev, Russia's president, visited the assembly plant in Shushary near St Petersburg in November.

The $300m venture was initially set to produce 60,000 cars a year.

Ford shutdown

Yekaterina Kulinenko, a spokeswoman for Ford, said it would also be shutting down its St Petersburg area factory until July 13.

Foreign car makers had rushed to tap the country's rapidly expanding middle class after years of prosperity fuelled by oil revenues.

Russia was on the way to become Europe's largest car market, with sales rising some 25 per cent annually, but the downturn in the economy has caused car loans and other credit to all but dry up.

Rising unemployment has also helped curtail the market's rapid growth.
New car sales in Russia dropped 47 per cent in the first five months of 2009, compared to a year ago, the Association of European Businesses said.

Source:

Agencies