PARIS (Bloomberg) -- AvtoVAZ, the Russian automaker 25 percent-owned by Renault SA, plans to cut 10 percent of its work force, as it disposes of non-automotive activities, CEO Igor Komarov said.
“The cuts will be achieved by the end of next year through asset spinoffs and optimizing production,” Komarov said in an interview in Paris.
AvtoVAZ, Renault and Nissan Motor Co., in which the French carmaker owns a 43 percent stake, are trimming costs as they prepare to assemble new models on a shared production line in AvtoVAZ's headquarters city of Togliatti, southern Russia.
The 7,000 job cuts follow the Russian carmaker's reduction of its work force to 70,000 from 102,000 a year ago.
Workers at AvtoVAZ employed in activities that aren't essential to the company's strategy -- including social and other support services -- are being progressively transferred outside the company to new Russian state-backed employers.
The transfers account for the “vast majority” of the 7,000 planned job cuts, with the rest achieved through retirements and without compulsory firings, Renault spokeswoman Axelle de Ladonchamps said.
Help for foreign suppliers
AvtoVAZ, Renault and Nissan have urged the Russian government to abolish customs exemptions that allow foreign makers of auto parts to escape import duties, said Christian Esteve, Renault's top executive in Russia, who sits on the AvtoVAZ board.
“Local suppliers don't currently have the technology to produce modern parts,” Esteve told reporters in Paris. “If you want the local supplier base to develop, you have to protect it.”
The three carmakers want local parts makers to supply 74 percent of the components for new models to be introduced under the Renault and Nissan brands and AvtoVAZ's Lada brand starting in 2012, Esteve said. That requires an end to the duty exemptions, “among other things,” he added.
They also want Russia to repeal a decree that allows foreign carmakers to avoid duties of about 35 percent, undermining the incentive to invest in the local supply chain, Esteve said. “We're still negotiating over this.”
Renault's Russian assembly lines currently draw on local suppliers for 51 percent of their components, excluding engines and gearboxes, Esteve said -- about twice the average among foreign carmakers.
Government-sponsored incentives lifted the market share of AvtoVAZ, Renault and Nissan to 38 percent in the first five months from 30 percent last year, CEO Komarov said. The companies said they are targeting a combined share of 40 percent for 2015.