By Andrey Ostroukh
MOSCOW--A car-making venture owned by PSA Peugeot Citroën and
Mitsubishi Motors Corp. will temporarily suspend production at its
factory in Russia and cut jobs in response to a plunge in sales,
the company said Friday.
Facing falling demand for new cars, PSA Peugeot Citroën Russia
said it would halt production of its Citroën C4 and Peugeot 408
models between April 27 and July 10 at its factory in Kaluga,
located about 110 miles southwest of Moscow. It will also suspend
the assembly of some SUV vehicles until May 12, with the loss of
100 jobs.
"Despite the efforts we make, the continuing worsening of the
market situation prompts us to make painful decisions," PSA Peugeot
Citroën said in a statement.
Russia's car market has been badly dented recently as the value
of the ruble has tumbled over the past year.
Foreign car makers, which once saw Russia as a promising
emerging markets, now face slumping demand and are being forced to
scale down local production. Several foreign manufacturers had bet
on Russia overtaking Germany as Europe's biggest car market, which
seemed likely until the Ukraine crisis.
On Monday, Volkswagen AG said it was cutting production at its
site in Kaluga; earlier this month, General Motors Co. decided to
close its St. Petersburg plant and stop selling most locally
manufactured Opel and GM cars.
That move came in response to regulatory pressure, economic
uncertainty and a dire outlook for Russian auto sales. Industry
volumes in the country fell 10% in 2014, and declines widened in
January and February as the economy weakened and the ruble
continued to weaken.
As a result, GM's plant in St. Petersburg, employing 1,000
people, will cease production by the middle of the year. GM will
also end its deal with Gorkovsky Avtomobilny Zavod, or GAZ, a
contract manufacturer building Chevrolet vehicles.
The Russian government already has pledged to subsidize car
loans and finance car purchases for state bodies in an attempt to
support the tumbling market. Moscow forecasts that these measures
will help to slow the contraction in car sales to 24% this year. In
February, sales of new cars and light commercial vehicles fell 38%
on the year, according to the Association of European
Businesses.
Write to Andrey Ostroukh at andrey.ostroukh@wsj.com
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