Due to sanctions imposed by the United States, the Russian economy is stumbling and Russia’s currency, the ruble, has dropped dramatically over the past six months. Though it’s made a small recovery since plummeting in January, the ruble has affected businesses of all types, including automakers that manufacture vehicles in the country.
The Volkswagen Auto Group (VAG) sales in Russia fell 40 percent in January on a year-over-year basis, while the broader market was down 32 percent, according to Moscow-based lobby group the Association of European Businesses. To that end, VAG has announced that it will trim jobs and cut back shifts at its plant in Kaluga, located just south of Moscow. VAG’s announcement comes less than one week after GM announced it would cease Opel and Chevrolet sales in the Russian market.
While VAG’s announcement doesn’t specify any specific brand or model, the automaker was clear in that it will hack 150 jobs from the Kaluga facility. VAG also announced that the plant would only work just four days a week from April to July in 2015. And starting in May, the number of shifts at the plant will drop from three to two. The automaker will also suspend production for two weeks, May 5-8 and May 12-15.
While the automaker has stated that it will not renew the aforementioned 150 jobs, it will offer employees packages to move to its new engine plant or auto parts warehouse. Both of those facilities are scheduled to go online later this year. Those who wish to give up their jobs in mutual agreement will be offered compensation packages.
Despite the notable sales drop, Volkswagen says its investment plans are intact and its new facilities are moving along right on schedule.
“The Russian market still has a significant growth potential long-term,” the automaker said in a statement.