Frankfurt - Volkswagen AG is set to reduce production and offer voluntary termination agreements to workers at its Russian factory in Kaluga as demand shrinks, according to people with direct knowledge of the plan.
VW also won’t extend contracts for about 150 temporary workers, said the people, who asked not to be identified before an official announcement.
VW has already sent more than 100 workers from Russia to Germany for training programs and will transfer some employees from Kaluga to a nearby engine factory or the company’s warehouse operation outside Moscow, the people said.
While it doesn’t expect demand for cars in Russia to recover in the coming months, VW will stick to its investment plan in Russia as it still perceives the market’s long-term potential as promising, they said.
A VW spokesman declined to comment and referred to a planned announcement to staff in Kaluga scheduled later on Monday.
VW is the latest western company to change tack in Russia as economic sanctions hamper growth and consumer spending. General Motors said last week that it would idle a plant in St Petersburg and halt sales of its Opel brand and most Chevrolet models, all but abandoning the market damaged by fallout from President Vladimir Putin’s annexation of Crimea from Ukraine.
Global automakers started to reduce shifts at Russian factories last year to counter contracting demand for new vehicles as the ruble weakened against other major currencies.
The downturn caused ripple effects across the industry as many car manufacturers had previously invested heavily in production capacity in the Russian market. The country had been forecast by analysts and industry executives to overtake Germany as Europe’s largest sales region before the economy faltered.
Bloomberg