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Russia's Largest Carmaker Announces Major Layoffs

The AvtoVAZ factory in Tolyatti
(RFE/RL) -- Russia's largest automaker has announced that it will cut one-quarter of its workforce at its Tolyatti production plant, as it continues to struggle with the effects of the global economic downturn.

AvtoVAZ, which is partly owned by French automaker Renault, will shed 27,600 jobs under an agreement negotiated with unions. Management had earlier sought to cut some 36,000 positions.

Economist Yevgeny Gontmakher of the Moscow-based Institute of Global Economy and International Relations says that the measures taken so far to help AvtoVAZ -- including massive state financial aid and the raising of import duties on foreign automobiles -- have been ineffective.

"AvtoVAZ's situation has been critical for a long time and the way out still is not clear -- at least no way out in the framework of the paradigm that was chosen about a year ago," Gontmakher says.

"That paradigm is very simple -- the government will do whatever it can to support this company, with its out-of-date technology and extremely poor management. In fact, we are talking about maintaining the same uncompetitive condition -- both on the domestic and international market -- that everyone has known about for a long time," he says.

Under the agreement, some 13,000 pension-aged employees will be let go, as will 5,500 workers who are approaching retirement. The company said it expects to rehire some 6,000 workers in 2012 when a new production line -- being built jointly with Renault -- comes on line.

Production at the plant will be slashed to some 500,000 cars per year, about 65 percent of capacity.

The vast AvtoVAZ plant was built in the 1960s and produces the popular Lada brand. It was the scene of worker demonstrations last month after management cut wages by 50 percent. Labor unions stepped up calls for the plant to be nationalized.

New Ownership

Earlier this month, Prime Minister Vladimir Putin acknowledged that government efforts to assist the troubled auto giant have so far been ineffective.

However, Gontmakher says, the government probably cannot afford to allow AvtoVAZ to fail.

"Sooner or later, regardless of government support, this might all result in collapse -- economic and, of course, social. Because more than 100,000 people work at AvtoVAZ and it is the basis of the city of Tolyatti," Gontmakher says. "Plus hundreds, perhaps thousands, of suppliers across the country are dependent on AvtoVAZ. So it would be impossible not to take radical measures to pull AvtoVAZ out of its systemic crisis."

Gontmakher believes the only solution lies in new ownership for the company and intense government assistance for displaced workers in order to prevent unrest.

Economist and liberal politician Grigory Yavlinsky, however, feels that predictions of widespread demonstrations in Russia because of layoffs are exaggerated because the country's authoritarian government has stifled civic expression so thoroughly.

"There are no civil liberties, no freedom of expression, no right to gather or demonstrate, no right to vote freely. This doesn't exist," Yavlinsky says.

"So, in these conditions, what is happening in Russia? Not an uprising or such natural phenomenon but a deepening of criminalization and the collapse of society. People begin solving their problems absolutely independently, ignoring and even despising the government, rejecting it. And it will be very hard to reverse this process," he says.

RFE/RL's Russian Service contributed to this report.