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. Last Updated: 07/27/2016

Unease Grips ‘Russian Detroit’

ReutersAvtoVAZ employees standing at a bus stop in front of the factory as they await a ride home in Tolyatti last week.

TOLYATTI, Samara Region — Alexander Afanasyev, a veteran worker at Russia’s largest car plant, fears that he could one day be stabbed by a friend.

But it isn’t paranoia that fuels that fear. The threat of job losses and starvation is spreading fast in the Russian Detroit on the Volga River.

Carmaker AvtoVAZ, faced with plunging car sales, is preparing to cut a quarter of its work force, or 27,600 people, in the largest round of job cuts in a single Russian city.

Fears of job cuts could turn into a loathing of the authorities, testing the government’s ability to avoid unrest as sharp recession follows a decade of boom.

“It could get really ugly,” said Afanasyev, 50, an assembly line worker and an active member of AvtoVAZ’s trade union, which is tentatively planning protests on Oct. 17.

“What if, for example, I’m not fired and my redundant friend, who stood beside me on the assembly line, ‘greets’ me at my front door as he knows I’m still getting money?” asks Afanasyev.

AvtoVAZ, a behemoth that still produces some clunky Lada models on outdated 1960s equipment, has grown used to decades of state money injections.

Hopes of modernization soared when France’s Renault bought a quarter of the firm for more than $1 billion two years ago, but many of the restructuring plans have been delayed as budget revenues fell.

Putin came to AvtoVAZ six months ago to pledge $1 billion in state support to avoid what he described as the General Motors scenario, when 34,000 people were fired. With state money quickly spent paying off debts and an expected net loss of more than $1 billion this year, AvtoVAZ management was forced to cut working hours and wages as a last resort to avoid mass layoffs.

But the slowly brewing frustration in the one-factory town of Tolyatti may easily turn into anger.

“I don’t think people will be smashing shop windows. … I think they [workers] have already decided what to do. If it becomes too tough, they will block the M5 highway,” said an official at the Tolyatti mayor’s office, who asked not to be named.

The highway is one of the main roads between Moscow and the Urals. In June, Putin traveled to Pikalyovo to rebuke Oleg Deripaska after protesters blocked a road over unpaid wages.

The car market had been on its way to becoming Europe’s biggest last year before the crisis reversed a decade-long boom and shut down cheap financing.

Overall sales have halved and those of AvtoVAZ have fallen by 44 percent despite getting some support from the ruble’s devaluation, as analysts say the state has been slow in spurring demand.

This will be no excuse, however, for officials and managers at Tolyatti, the top recipient of state aid in 2009, if Putin has to return to the town of 730,000 inhabitants amid protests.

Officials said public service jobs, such as street cleaning, will be abundant for unemployed workers, many of whom still use hammers to fine-tune Ladas on assembly lines.

But Tatyana Merkulova, deputy head of Tolyatti’s employment center, said she dis not share this enthusiasm as she has only 1,400 vacancies for 12,000 jobless, in sharp contrast with 6,000 vacancies for 2,000 jobless a year ago.

“I really don’t know what we will do,” she said when asked about the big new wave of job cuts. Street cleaners are paid 4,000 rubles ($132) per month in addition to their jobless benefits of 4,900 rubles. Last year’s average wage at AvtoVAZ was 20,000 rubles.

Alexander Borisov, 29, says he can barely feed his wife and newborn baby despite still working at AvtoVAZ, as he will get a reduced wage of 8,000 rubles this month, of which half will be used to pay his rent.

“Sometimes I have only a few kopeks left and it drags on and on. Something like 100 rubles for a day, sometimes 80,” he said. That is enough to buy three bottles of beer.

Officials hint that they might have a last-minute plan.

“I don’t think AvtoVAZ will die,” Finance Minister Alexei Kudrin said Tuesday, adding that it was the last time that the state would help AvtoVAZ, possibly by increasing its stake from the current 25 percent, but will also demand a big restructuring.

Sberbank head German Gref also said this month there might be a role for AvtoVAZ in the bank’s joint deal with Canada’s Magna to run German carmaker Opel.

Pyotr Zolotaryov, the leader of AvtoVAZ’s trade union, says authorities have no other option but to meet the demands.

“We will find instruments … to force the employer to agree with our arguments … There are different strikes, including sit-ins for example. This is when people come to work and don’t go home,” he said.