GM's Opel to cut Russia production as slowdown bites

Tue Sep 16, 2014 8:59am EDT
 
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By Andreas Cremer

BERLIN (Reuters) - Opel Group, the European arm of General Motors (GM.N: Quote), is cutting production and shedding around 500 jobs in Russia, hit by the weak Russian rouble and a plunge in local demand due to a slowing economy and Western sanctions.

Opel said on Tuesday it would cut production at its plant in St. Petersburg where it builds the Opel Astra and Chevrolet Cruze compact models, to one shift per day from two.

It will also offer voluntary severance packages to about a quarter of the plant's 2,000 staff and accelerate a move to use more local suppliers - a shift that will help it to cope with a weakening Russian rouble RUB=.

The rouble is this year's biggest-declining major emerging currency, having lost more than 15 percent in value to hit a new low against the U.S. dollar on Tuesday.

Western sanctions against Russia over the crisis in Ukraine are causing further strains to carmakers.

"Demand has been in free fall recently, none of the carmakers producing in Russia will be able to escape output cuts," said Tatiana Hristova, analyst at market research firm IHS Automotive.

Production of passenger cars and commercial vehicles may slump 14 percent this year to 2.4 million autos, declining a further 6.5 percent in 2015 to 2.24 million before rebounding in 2016, Hristova forecast.

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An assistant polishes an Opel Astra during preparations for the Moscow International Automobile Salon August 29, 2012. REUTERS/Sergei Karpukhin