Foreign automakers pause in Russia amid sanctions and supply shortages
At the Volkswagen plant in Kaluga, an industrial city 180 kilometers south of Moscow, the parking lot is full of new cars, but the factory is almost empty after production stopped last month.
Volkswagen is one of three automakers in this city that have shut down operations due to the aftermath of the Russian invasion of Ukraine and its impact on the global supply chain. Corresponding Yale School of ManagementMore than 750 companies have pulled out of Russia or restricted their operations since the invasion.
“The problems started when we ran out of parts,” said Valery Uglov, who works as a car mechanic at Volkswagen’s plant. “We can’t really put a car together without parts.”
Volkswagen, along with Volvo and Stellantis, a Netherlands-based manufacturer whose models include the Peugeot and Citroen, employ a combined 7,000 people in the city.
While all workers will receive at least part of their wages for now, it is unclear when they will be able to return to work and how foreign companies will continue to operate in Russia as sanctions increasingly isolate Russia from the global market.
Since Russia invaded its neighbor on February 24, thousands have been killed in Ukraine, cities have been reduced to rubble and more than five million people have fled abroad. The invasion also disrupted world trade, and as more countries banned Russian energy exports, commodity prices have skyrocketed.
The World Bank forecasts that Russia’s GDP will contract by 11 percent this year.
In Kaluga, a city of 320,000, most people who spoke to CBC News said they were not overly concerned about the work stoppages at the auto plant and believed the setbacks would be short-lived.
Uglov’s colleague Alexander Abrosimov has worked at Volkswagen for 12 years and said there are always concerns when it comes to employment in the auto sector. He said there had been cuts in the early days of the pandemic and that too would only be temporary.
“It’s good that Europe and the US are not the whole world,” he said, citing the fact that most of the sanctions come from the West.
“We still have Asia… and I think we will work with them”
in one Explanation In an online posting, Volkswagen announced that it had stopped production in Kaluga and Nizhny Novgorod, 400 kilometers east of Moscow, since the beginning of March because of the “overall situation” and the “great uncertainty and upheaval”.
The company also stopped exporting its vehicles to Russia. Volkswagen, which has some suppliers in western Ukraine, said it was fully implementing the imposed sanctions.
The statement said the situation in Ukraine, along with sanctions and counter-sanctions, has made it difficult to transport parts and supplies. Rail and vehicle routes are disrupted and many shipping companies are refusing to call at Russian ports.
car industry is struggling
Evgeny Eskov, the editor-in-chief of the Moscow-based AutoBusiness Review, told CBC News that the sanctions’ impact on Russia’s auto sector was “huge.”
He said that most of the country’s factories that produce passenger cars are currently not operational because the Russian auto sector is closely linked with foreign companies. According to the Association of European CompaniesAuto sales in Russia this March fell by almost 63 percent compared to March last year.
The Russian government has repeatedly stated that it will innovate and find other suppliers.
Speaking to lawmakers in St. Petersburg on April 27, Russian President Vladimir Putin said Russia will “counteract all gross and often inappropriate external restraints” and that many of Russia’s industries are now seeing “good, new and modern opportunities opening up “. “
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But Eskov doesn’t think it will be that easy for Russia to fix its supply chain problems.
He says while Russia may be able to source parts from a “friendly” country, the challenge is actually getting them to Russia.
“Everything will depend on how long the special operation in Ukraine will last,” Eskov said. “It is clear that factories cannot stand still for long, they have to do something.”
French automaker Renault has a 68 percent stake in Russia’s largest automaker AvtoVAZ, which makes the best-selling Lada, but on April 27 Russia’s trade minister reported that Renault had agreed to sell its stake to a Russian scientific institute for one ruble.
The Trade Ministry also reported that the Renault plant in Moscow, which produced the Renault and Nissan brands, would be handed over to the city government.
Russia has warned it could expropriate foreign assets if companies pull out of Russia, and Volkswagen says in its online statement it is following these discussions with concern.
fear of prosecution
A tire factory in Kaluga, owned by Germany-based multinational manufacturer Continental AG, said it restarted some of its production over fears local workers could be prosecuted.
In a statement to CBC News, Marc Siedler, who works for Continental AG’s media relations, said the company was taking this step “to fulfill our duty of care to employees in Russia” and that Continental’s decision to restart in “No way motivated” by profit.
The company declined to clarify what criminal sanctions it fears, but Russia’s State Duma is considering one draft law This could allow prosecutors to prosecute local managers or directors for sanction compliance
“We survived on bread and potatoes and we will survive this”
Nevertheless, many residents of Kaluga are optimistic about the future. In addition to the auto sector, there are a number of other factories in the city, including those manufacturing railway equipment and electronics.
“We have to start producing our own stuff in these plants,” said Victor Petrovich, speaking to CBC News downtown.
Several residents told CBC News that they’d noticed food prices rising since the war and that there had been shortages of Russian staples like sugar and buckwheat, but Petrovich wasn’t overly concerned.
“In the ’90s we survived on bread and potatoes and we will survive that.”
In Kaluga, large posters hang on the sides of buildings with the letter Z, which has become a symbol of support for Russia’s invasion of Ukraine. Like other Russian cities, Kaluga is preparing for Victory Day on May 9, when Russia celebrates military achievements during World War II.
A billboard with an image of an adorned military hero stands on one of the boulevards where a young family stopped to take photos.
Many in the city feel a strong sense of patriotism, but not one middle-aged woman who stopped to speak to CBC News and only gave her first name.
“I don’t think anything good is in store for us,” she said.
“Everyone around me supports the war and says we will survive the sanctions, but I’m the complete opposite. I am against the war.”