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Russian Workers At Foreign Auto Plants Face Uncertain Road Ahead As Production Idles Indefinitely

A worker assembles a new model at the Nissan plant in outside St. Petersburg.
A worker assembles a new model at the Nissan plant in outside St. Petersburg.

As Russia's economy surged during the 2000s, boosted by soaring commodity prices, foreign automakers jumped at the chance to open local production facilities in a country where car ownership had been rare just a decade earlier, before the Soviet collapse.

With a population of nearly 150 million and a rapidly expanding middle class, Russia was forecast to become Europe's largest car market by sales by 2020 if not earlier.

U.S., European, and Japanese firms, one after the other, opened modern plants to great fanfare in Russia's two new auto clusters of St. Petersburg and Kaluga, southwest of Moscow, hiring thousands of local workers at relatively good salaries.

The factories, which combined churned out hundreds of thousands of cars a year, represented one of Russia's most successful foreign investment policies since the launch of market reforms following the disintegration of the communist Soviet Union in 1991.

But Russian President Vladimir Putin's decision in February to invade Ukraine has nearly obliterated all of that progress in a matter of months.

Most foreign automakers in Russia have halted production indefinitely, if not exiting the country completely, in the wake of sweeping Western sanctions aimed at punishing Putin for the unprovoked offensive.

The sanctions have banned or complicated the import of key car components including microprocessors, or chips.

Russian auto production fell by an astounding 97 percent in May compared with the same period last year.

Thousands of Russians employed by foreign automakers are caught in the crosshairs and wondering what the future holds for them.

"People are waiting for what will happen next," Sergei, a worker at Nissan's plant in St. Petersburg, told RFE/RL, adding that his co-workers for now were "not discouraged."

When and whether foreign companies like Nissan resume production will almost certainly depend on the course of the conflict in Ukraine, which has now bogged down into a war of attrition. Some Western military officials and experts say it could drag on for years.

"We believe this [war] could become more serious and prolonged," Nissan CEO Makoto Uchida said last month at the company's annual shareholders meeting in Japan, according to a company spokesman.

Nissan, which employs about 2,000 people in St. Petersburg, has halted production until at least October, Uchida said.

Japan's Toyota and Korea's Hyundai have also halted auto production at their plants in St. Petersburg. European truck makers Man and Scania have done the same.

Foreign auto companies employed nearly 10,000 people in St. Petersburg and about 7,000 in Kaluga prior to the war. Nearly all of the workers have been furloughed.

Foreign auto producers in St. Petersburg continue to pay employees at least two-thirds of their salaries while they monitor political developments.

Nissan's plant outside St. Petersburg. Are companies from India or China ready to make the investment necessary to take its place?
Nissan's plant outside St. Petersburg. Are companies from India or China ready to make the investment necessary to take its place?

The average auto worker in St. Petersburg earns about 40,000 rubles ($634) a month, meaning they are now receiving about $400 a month.

The sharp cut in salary for autoworkers comes as the cost of living in the country has surged. Experts forecast that inflation in Russia will accelerate this year to 14.5 percent.

Sergei, who did not want his last name published for fear of repercussions, says it doesn't make sense to quit while still receiving most of his salary.

With Russia's economy forecast to contract this year by the largest margin since the early 1990s, auto workers may struggle to find full-time employment in other industries.

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Igor Temchenko, chairman of the Interregional Trade Union Workers' Association (MPRA) in St. Petersburg and the surrounding Leningrad region, says many autoworkers are nonetheless trying to find side jobs to supplement their income as they wait to see what the future holds.

"Of course, this is not enough [money] for many workers," he said, referring to the partial salary payment. "Those who have additional specialties can find part-time work in that field, but mostly people are taking unskilled jobs: some work as loaders [of goods], others...have licenses as taxi drivers," he said.

St. Petersburg Governor Aleksandr Beglov said that if the foreign automakers eventually decide to leave the city, companies from "friendly countries" -- presumably a reference to China and India -- could take their place.

That is easier said than done.

Auto factories are designed to produce specific models and cannot simply be retooled or rejigged to make cars by another firm, analysts say.

And the country's car market today is a far cry from the burgeoning one that attracted foreign firms in the 2000s.

With disposable incomes in Russia plunging and the middle class shrinking, it will be challenging for companies even from non-Western countries to justify investing hundreds of millions of dollars in new production facilities.

Written by Todd Prince based on reporting by RFE/RL's North.Realities

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