The Global Car Industry Stays Brutal: Russians Cut 26,000 Jobs

The employee bloodletting in the automotive industry is not confined to the US where hundreds of thousands of factory workers have lost their positions over the last decade.

The largest car company in Russia will cut a quarter of its employees. OAO AvtoVAZ will fire 26,700 people.

Despite rumors to the contrary, the global car and light vehicle market is not recovering at all.

There have been two signs that auto sales were picking up over the last quarter. One is real but isolated. Chinese sales are up 40% in some months compared to 2008, and it is set to pass the US as the largest market in the world later this year. The benefit of that growth has gone primarily to local firms and two multinationals, GM and VW, which have built large market share in the world’s most populous nation.

The other sign was the sharp rise in American sales in late July and August due to the “cash for clunkers” program. The benefits were short-lived. Early estimates are that sales in September will be devastating and that the annual run-rate for vehicle sales in America will drop to 8.8 million, a level not seen in over three decades.

Sales in the huge car markets especially the US, UK, EU, and Japan may not pick up for a year or more. Layoffs in the US have been so extreme in the last two years that they may be largely over. Europe may not be so lucky. Opel, recently sold to Magna by GM, has discussed cutting thousands of workers so that production will meet market demand. As Fiat takes more control of Chrysler, it may find that sales at the No.3 car firm are not recovering and that there are redundancies in personnel between the two operations.

The car companies may be breathing again, barely, but some have not made it off life support.

Douglas A. McIntyre