Lada-maker AvtoVAZ to cut 7,500 jobs as Russian car market slows

To boost falling sales, Lada is revising its design -- previewed by the X-Ray concept, shown.
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MOSCOW -- Russia's biggest carmaker, AvtoVAZ, will cut 7,500 jobs, about 11 percent of its work force, in its fight to maintain profitability as economic stagnation hurts the domestic car market, CEO Bo Andersson said.

AvtoVAZ has developed "urgent measures" to adjust production, cut costs and tighten control over inventory and working capital, Andersson, the former top purchasing manager at General Motors Co., said in a statement.

The biggest reductions will be made in manufacturing, with 5,000 positions cut through attrition, a hiring freeze and redistribution of the work force between divisions, AvtoVAZ said. The remaining 2,500 will be managers, specialists and office workers, according to the statement. "All of AvtoVAZ's processes are being revised," Andersson said in the statement.

Russian new car sales fell 6 percent to 2.78 million last year after growth averaging 27 percent in the previous three years, the Moscow-based Association of European Businesses said Jan. 15 in a statement. This year sales may decline to about 2.73 million vehicles, the group forecasts.

Sales of AvtoVAZ's Lada brand shrank 15 percent to 456,309 vehicles.

AvtoVAZ in October reported that it had swung to a first-half net loss. The automaker is due to come under the control of Renault-Nissan this year, with its new owners planning to win market share by taking the boxy Lada models upmarket.

To support the struggling industry, the government recently announced plans for subsidies for Russian automakers of up to 271 billion rubles ($8 billion) in the three years to 2016.

40% share target

Andersson was appointed AvtoVAZ CEO on Dec 31. Before joining the automaker, Andersson was credited with the turnaround at Russian bus and truck maker GAZ, boosting profits with a cost-cutting drive.

His target will be to achieve a target set by Carlos Ghosn of a 40 percent combined market share in Russia for AvtoVAZ, Renault and Nissan by 2016.The three carmakers are planning joint annual production capacity in Russia of 1.7 million vehicles by 2016.

Renault and Nissan are in the process of acquiring indirect 74.5 percent control of AvtoVAZ.

Bloomberg and Reuters contributed to this report

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