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. Last Updated: 07/27/2016

AvtoVAZ Confirms Plans to Lay Off 25% of Work Force

AvtoVAZ said Thursday that it may eliminate 27,600 jobs, or about a quarter of its work force, after rumors swirled that it would lay off 36,000 people by the end of the year.

Annual production will probably fall to 500,000 vehicles, the automaker said in a statement. Last year, AvtoVAZ manufactured about 920,000 vehicles. The job cuts include 5,000 positions announced earlier this month. The automaker didn’t specify when the reduction would take place.

“The excessive number of workers is AvtoVAZ’s main problem,” said Artyom Lavrishchev, an analyst at KIT Finance. The car market probably won’t match last year’s level until 2011 or 2012, he said.

AvtoVAZ, 25 percent owned by Renault, said Thursday that it is operating at 65 percent of capacity. The automaker’s share of the Russian market may decline to 17 percent in 2015 from 25 percent this year as foreign automakers ramp up production in Russia, Goldman Sachs said in a report this week. AvtoVAZ has the poorest cost control and highest leverage among its Russian peers, according to Goldman.  

The carmaker is the biggest employer in Tolyatti, where its work force of 102,000 accounts for almost a seventh of the city’s population of 741,000.

Wages for AvtoVAZ employees were due to be slashed by half this month as it scales back work hours. Average monthly pay at the plant is 12,000 rubles ($400), according to the head of the local trade union. The carmaker announced plans June 24 to operate one production shift of eight hours a day, five days a week through February to reduce spending.