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RPT-FEATURE-Russian auto workers may be flashpoint

* Crisis reverses growth in Russian auto market

* Concentration of workers heightens risk of protest

* Workers angry, also resigned

NIZHNY NOVGOROD, Russia, May 11 (Reuters) - The gates of a grey car factory in central Russia creak open, releasing hundreds of workers into the bright spring sunshine. It’s the weekend, but the mood is grim.

Confronting the decline of the Russian car market -- which until the global economic crisis had been set to overtake Germany as Europe’s biggest -- workers at this factory and others like it are a potential lightning-rod for protest.

“We’ve had our pay cut by half,” said one of them, giving her name only as Lyudmila. She has worked at the GAZ car plant controlled by oligarch Oleg Deripaska for 20 years and now earns 8,000 roubles (about $250) a month.

“Of course we’re angry with the management, but what can we do?” she said, then walked on past stray dogs to buses waiting to take her and other workers home.

This frustration is worrying the authorities, analysts say, citing real concern about protests particularly around the car industry. Prime Minister Valdimir Putin has already pledged $1 billion to prop up jobs in car manufacturing and introduced a tariff on car imports.

“What’s important about the car industry is that it’s very concentrated,” said Maria Lipman, an analyst at the Carnegie Center in Moscow. “Most discontent in Russia is fragmented, but this is concentrated and could present a real risk.”

Nizhny Novgorod, home of the GAZ auto group that makes the Volga saloon car, is a city of about 1.3 million around 400 km (250 miles) east of Moscow. The other city heavily reliant on the car industry is Togliatti in central Russia: with a population of about 700,000 it is the home of AvtoVaz, Russia’s largest car maker and producer of the Lada.

GAZ currently accounts for around 4 percent of new car sales while AvtoVaz has about 22 percent of the market.

Lipman said the potential for mass protests had diminished since the end of last year, as popular faith in the authorities has held. But this could turn.

“Every factory manager is under surveillance not to fire people and start mass discontent,” she said.

The deputy governor of the Nizhny Novgorod region, Gennady Suvorov, is candid about the significance of the GAZ factory: “If the main assembly line for automobiles stops working, many other enterprises in Nizhny Novgorod and the region will also stop working,” he said.

“The importance of the factory is extremely high.”


The crisis has stalled a decade of economic growth in Russia fuelled mainly by revenue from oil and mineral sales. Since December about 1 million people have lost their jobs.

It hit just as millions of Russians had begun to enjoy improved lifestyles -- a new car, foreign holidays and renovated apartments. Car industry analysts had predicted Russia, with a population of about 142 million, would be the biggest car market in Europe by around now.

Foreign car companies set up dealerships and factories to tap into the boom and diversify from saturated markets in Europe and the United States. Ford is the largest foreign brand with more than 8 percent of total new car sales.

But last year Russia’s stock market fell 72 percent. The rouble has weakened by around a third against the dollar, bringing no relief as Russia barely exports any cars, and sales of new cars nearly halved in March from the previous year to 136,284, according to Moscow lobby group the Association of European Businesses (AEB).

That compares with a decline of less than 10 percent in total European car sales in that month, according to the European Automobile Manufacturers’ Association.

Basic Element, the Deripaska conglomerate that controls GAZ, owns stakes in companies that are trying to restructure $20 billion worth of debt. Last week it agreed to sell British van maker LDV, which it also owns, to Malaysian vehicle importer Weststar.


The car industry is one of Russia’s biggest employers, with 235,000 workers directly of a total workforce around 75 million at the end of 2008 but far more people indirectly employed, said Ivan Bonchev, car analyst at Ernst & Young.

“The social factor of the car industry is considerable,” Bonchev said.

Back outside the GAZ factory, workers said they also felt helpless. They had seen it all before.

Salaries and jobs disappeared from 1991, when the Soviet Union collapsed and the rouble devalued in 1998 snuffing out savings. Long queues outside shops and banks and scuffles characterised these declines, but there was no mass unrest.

Another worker, leaving in a thick black coat, said he had been employed in the same GAZ factory for 35 years and also seen his pay halved.

“The management is just looking after themselves,” he said.

GAZ officials said its top management had taken a 30 percent pay cut since the fourth quarter of last year and factories had switched to a three-day week.

“Salaries reflect this new schedule,” a spokeswoman said. “We cut 1,200 jobs when we reduced production. This is 3 percent of the total workforce.”

Bonchev said foreign car manufacturers had already eaten into GAZ’s market share with better-quality models. GAZ sales in March fell by nearly two-thirds, according to AEB figures.

The decline has already triggered a knock-on effect. Next door to the factory, Autocomponent makes plastic parts such as wing-mirrors, dashboards and steering wheels. Its sales have halved and prices are down by one-fifth, said Oleg Zaitsev, the general manager.

Around three-quarters of its sales had been to GAZ.

“It’s very demoralising but we absolutely have to survive,” he told Reuters on a factory floor humming with the noise of equipment from Germany and Austria.

He has already laid off nearly a third of his 1,000-strong workforce and cut wages for the rest by 15 percent.

For workers in blue overalls piecing together wing-mirrors, the future is daunting. Larisa Romanova, 45, has had her pay cut, her husband’s shifts at GAZ have been halved and she is in debt.

“We’re worried,” she said as she packed a metal container with foam. “But we’re also pleased just to have a job.” (Additional reporting by Anton Doroshev in Moscow; Editing by Sara Ledwith)