Russian economy has been influenced by the wide spread credit crisis. Turmoil in this sector caused tighter credit conditions, that in turn torpedoed the automotive industry. GM's reluctance to completely shutdown production for a determined period of time, instead of reducing workdays, comes from the fact that the St. Petersburg plant only opened last November, after a $300 million investment.
The plant has an assembly capacity of some 70,000 cars per year, an unlikely figure to be reached giving the current situation. The decision to open in Russia was sustained at the time by the 44 percent increase in sales in January – September 2008. Opening the plant turned out to be a big gamble, as the economic crisis has worsened dramatically since then, while sales have decreased by nearly half. Still, GM officials hope Russia will become their biggest market.
To emphasize this, Sergei Lepnukhov stated that GM is looking to increase production to 100,000 vehicles per year by 2012. The decision to cutback workdays in Russia is part of the set of measures taken by GM to insure its survival. As we reported yesterday, GM announced it will fire 2,000 workers and idle several other plants in the US.