General Motors halts production at Russian plant due to low demand

Troubled US automaker General Motors Corp said Monday it will halt car production at its Russian plant in St Petersburg for two months due to low demand.

"Having carefully studied the state of the Russian car market and the degree of reduction in the demand from the creditworthy population, we took the decision not to force this year an increase in production volumes at our Russian plant," the company said in a statement.

Production will be halted from July 1 to Aug. 31, it said.

The announcement comes as the factory was due to restart work after a 20-day planned stoppage to prepare it for the production of a new model.

Before the economic crisis bit in the second half of last year, Russia had been on its way to overtake Germany as Europe's largest car market. But now, with the country in the midst of its first recession in a decade and consumers tightening their belts, car sales are expected to slump by as much as 60% this year from the 3.2 million sold in 2008.

GM, which employs 986 people in Russia, opened the St Petersburg plant last November with $300 million of investment. The factory plans to reach a capacity of 60,000 cars per year by the end of 2010.

"We are doing everything possible to minimise the negative impact of the reduced production volumes on the workers of the plant. All the period of forced stoppage will be paid at 2/3rds of the average worker's wage, and by the end of August the factory will return to the normal timetable," the company said.

Some 3 million Russians have lost jobs during the current crisis, while many more have had salaries and working hours cut.