Russia's Automotive Industry Hit by Economic Crisis

With several large car manufacturers, including Volvo and Jaguar Land Rover, already heavily affected, the economic crisis makes new victims in the automotive industry, this time in Russia. The country's largest carmaker, AvtoVAZ, sent an application to the state-owned VEB bank, requesting a loan of no less than $1 billion that could help it reduce the loses caused by the economic crisis.

AvtoVAZ has approximately 100,000 unsold vehicles, the equivalent of two-months of full-time production, Autonews reported today. However, there's no official statement at this time but the Russian bank is currently considering the application with a decision expected next week. According to the same source, VEB bank received more than 35 funding applications but it's likely that AvtoVAZ will receive the money on the basis that “it is the first Russian company to ask for state funds to replenish means for turnover, not to refinance debts.”

The Russian government already took attitude to the financial crisis and decided to budget approximately $50 billion to help the companies affected by the global recession. “The money will flow via VEB at no lower than LIBOR plus five percent,” Autonews explained.

As previously mentioned, the economic crisis has made victims all around the world and even large car manufacturers have to lower the production and to cut jobs in order to reduce loses. For instance, three large motorcycle companies, Honda, Suzuki and Yamaha said yesterday that plants in North America and Europe will reduce the production with approximately 100,000 units due to the continuously decreasing demand met on these markets.

Jaguar Land Rover on the other hand, decided to cut jobs in the United Kingdom in order to raise the efficiency, the company's representatives repeatedly denying that the decision is somehow influenced by the global economic crisis.