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. Last Updated: 07/27/2016

AvtoVAZ Mulls Cutting Up to 12,000 Jobs

No. 1 carmaker AvtoVAZ is planning to fire up to 12,000 workers, sources said, which would be one of the largest layoffs in Russia's corporate history.

AvtoVAZ president Vitaly Vilchik said the company is laying off "excess workers" amid an overproduction crisis, the Ladaonline Internet newspaper reported Monday. AvtoVAZ is unable to sell its models, which include the popular Lada, following an inflow of cheap foreign imports.

Stopping the production line has not resolved the crisis and personnel cuts are needed, Vilchik said. "The main cuts will affect management, workers and auxiliary staff."

He declined to give the number of layoffs, but AvtoVAZ sources said that between 2 percent and 10 percent of jobs would be cut. AvtoVAZ employs some 121,000 people including its branches and representative offices, according to the company's second-quarter report.

Prime Minister Mikhail Kasyanov this summer signed a development program for the domestic auto industry that has boosted import tariffs on foreign cars older than seven years, but AvtoVAZ has lifted prices.

By mid-October, the company said it had a backlog of 77,000 unsold cars. Management halted production from Oct. 26 to Nov. 9 to avoid flooding the market.

AvtoVAZ began preparing to shut down production lines permanently, prompting talk of the layoffs, said a source close to the company, who added that the production line was restarted but management decided to cancel shifts.

No final decision regarding the layoffs has been decided, the source said.

"The personnel department says that 2 percent to 3 percent of staff will be made redundant, while management puts the figure at 10 percent," the source said, adding that "there is no special program to find employment for fired workers."

A source close to management, however, said fired AvtoVAZ workers would be transferred to an industrial park where they would produce car parts for the main plant in Tolyatti.

The source said redundant workers make up between 4 percent and 10 percent of staff,

mostly engineers and technical workers, and that management has long been planning to trim down the workforce.

"Due to a possible social crisis, it was difficult to take the decision to fire people, but management may use the present crisis to realize this long-time idea," the source said.

Maxim Matveyev, an analyst at Alfa Bank, said the crisis has indeed worsened the problem of overemployment. "Wages account for 8 percent of production costs, and the factory needs to optimize its overheads," he said. "The present crisis is stimulating the process of cutting costs."

Gorky Auto Plant, or GAZ, and Ulyanovsk Auto Plant, or UAZ, the country's second- and third-largest carmakers, respectively, are not planning job cuts, spokesmen at the companies said.

Base Element, which owns GAZ, cut personnel last year from 100,000 to 80,000. UAZ announced this year that it would increase staff by 5,000 to 30,000.

Former general director Eduard Shpakovsky had planned layoffs earlier this year, but this proposal was rejected by shareholders, a source close to the UAZ said.