(MENAFN - Arab News) BERLIN: Opel Group the European arm of General Motors is cutting production and shedding around 500 jobs in Russia hit by the weak Russian ruble and a plunge in local demand due to a slowing economy and Western sanctions.
Opel said on Tuesday it would cut production at its plant in St. Petersburg where it builds the Opel Astra and Chevrolet Cruze compact models to one shift per day from two.
It will also offer voluntary severance packages to about a quarter of the plant's 2000 staff and accelerate a move to use more local suppliers a shift that will help it to cope with a weakening Russian ruble.
The ruble is this year's biggest-declining major emerging currency having lost more than 15 percent in value to hit a new low against the US dollar on Tuesday.
Western sanctions against Russia over the crisis in Ukraine are causing further strains to carmakers.
"Demand has been in free fall recently none of the carmakers producing in Russia will be able to escape output cuts" said Tatiana Hristova analyst at market research firm IHS Automotive.
Production of passenger cars and commercial vehicles may slump 14 percent this year to 2.4 million autos declining a further 6.5 percent in 2015 to 2.24 million before rebounding in 2016 Hristova forecast.
Restructuring at Opel will also involve changes in senior personnel. Susanna Webber head of purchasing and logistics will take the helm of Opel's Russian operations with immediate effect to be assisted by new vice president Andy Dunstan who was previously the carmaker's managing director in the country.
Opel which sells the Opel Chevrolet and Cadillac brands in Russia has seen its market share in Russia fall to 7.8 percent in the first eight months of the year down from 9 percent in the January-August period 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 is sticking to its target of reaching profitability in Europe by mid-decade a spokesman for the automaker said.
"We believe in the long-term potential of Russia but volume and prices are under strong pressure and the ruble keeps devaluing. We're now taking steps to minimize the risk and stay on course" Neumann said.