GM’s Opel scales back Russian production as car market shrinks

Christoph Rauwald
Bloomberg News

General Motors Co.’s European division Opel is cutting jobs in Russia as the country’s car market shrinks amid political turmoil and a weakening currency.

The automaker’s plant in St. Petersburg is reducing operations to one shift a day from two and offering voluntary buyout packages to about 500 hourly and salaried employees, Ruesselsheim, Germany-based Opel said Tuesday in a statement.

The cuts are the second that GM has outlined in two months at the St. Petersburg site, which suspended carmaking from Aug. 22 through Sept. 12. Eight-month new light-vehicle registrations in Russia fell 12 percent from a year earlier as Russia’s dispute with Ukraine contributed to an economic slowdown.

Russia, which ranked as Opel’s third-biggest market behind the United Kingdom and Germany last year, “is currently facing serious turbulences,” Karl-Thomas Neumann, chairman of Opel Group’s management board, said in the statement. “While we believe in the long-term potential of Russia, there is significant immediate pressure on sales volumes and pricing while the ruble is deteriorating further.”

Neumann said Opel foresees these issues happening for the rest of the year and is acting now to “limit our risk.”

Opel is among Western automakers which have invested in Russia in anticipation that the country would soon pass Germany as Europe’s biggest car market. Instead, Russia is on the brink of recession following European Union and U.S. trade sanctions against the country over its territorial dispute with Ukraine. Ford Motor Co. has written down its entire $329 million investment in its Russian joint venture with OAO Sollers.

Opel also said that Susanna Webber, responsible for purchasing and supply chain in Europe, and a member of its management board, will immediately take over as president of GM Russia. The company said Andy Dustan, managing director of Russia since November 2013, has been appointed vice president of sales and aftersales in Russia.

Earlier this year, GM Europe took over responsibility for the Russian business from GM’s International Operations division. The Detroit automaker, which has lost billions in Europe since the late 1990s, is working to be profitable for Europe by mid-decade.

GM employs 4,000 people in Russia, and the St. Petersburg plant, which builds the Opel Astra and Chevrolet Cruze models, accounts for about half its staff. The factory employs 1,600 production workers.

Opel said it wants to avoid firings and that it’s offering a voluntary separation package that “is administratively and financially more attractive than the official redundancy package stipulated by Russian labor legislation.” The carmaker said it will consider mass firings if not enough workers accept the buyout.

Neummann said GM will adjust its expansion plans in Russia, but plans to launch the next-generation Chevrolet Niva in 2016 and add a new press, body shops and logistics center in the Samara region.

The combined market share of GM’s Opel, Chevrolet and Cadillac brands in Russia declined to 7.8 percent in the January to August period from 9 percent a year earlier, the carmaker said Tuesday.

In July, GM’s Chief Financial Officer Chuck Stevens told reporters that GM had cut production by 20 percent to 25 percent at its St. Petersburg plant so far this year. He said GM also has taken action to “price for the impact of the ruble.”

“As I see the second half (of the year), I think it’s more of the same. The team is reacting and I would suggest that to the extent that we can, we’re slowing down capital spending,” Stevens said. “We’re trying to ensure that we align inventories with the industry and (are) continuing to react to that situation.”

Detroit News staff writer Melissa Burden contributed.