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GM's Opel cuts Russian production on slumping sales

GM's Opel cuts Russian production on slumping sales
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General Motors’ Opel division in Russia is slashing production and shedding around 500 jobs.

The US carmaker blames a plunge in local demand due to a slowing economy and Western sanctions.

Production at the Opel plant in St. Petersburg will be cut to a total of 16 days during the three-month period from August to October.

It will also offer voluntary redundancy to about a quarter of the plant’s 2,000 staff and move towards using more local suppliers because of the weakening Russian rouble.

Russian and foreign carmakers have reduced output in response to slower sales as slowing economic growth is causing people to put off purchases.

In addition western sanctions over the crisis in Ukraine and the devaluing rouble are causing strains to carmakers. The rouble is this year’s biggest-declining major emerging currency, having lost more than 15 percent of its value.

Russian passenger car sales tumbled 23 percent in July and 26 percent in August and September.

General Motors is one of the foreign carmakers most exposed to Russia. Its share of the local market shrank to 7.8 percent in January-August from 9.0 percent a year ago.

“Russia was our third-biggest market last year after the UK and Germany,” Opel Chief Executive Karl-Thomas Neumann said. “At the moment, this market is locked into severe turbulences.”

Opel’s planned investments in parent GM’s joint venture with Russia’s top carmaker Avtovaz will not be affected.

Avtovaz said last month it would cut production of its Lada cars by 25,000 vehicles between September and November, though workers would continue to get their full salary.

with Reuters