23 Aug 2019 10:28

GAZ might switch to four-day week, lower wages due to weak market, sanctions - paper

MOSCOW. Aug 23 (Interfax) - GAZ Group , a Russian automaker controlled by Oleg Deripaska, has notified its employees that it might switch them to a four-day work week with reduced pay from October 21, 2019 to April 20, 2020, in part due to U.S. sanctions, national daily Kommersant reported on Friday.

It was reported on the forums of group employee that the notifications sent to them said that workers on salary will paid in proportion to time worked, while those on piece wages will be paid in proportion to volume of work.

GAZ confirmed the notification to employees, noting that the deterioration of the situation on the commercial transport market amid a gloomy macroeconomic environment, as well as the restrictions of sanctions could lead to a drop in operating results.

The automaker said the notifications are a precautionary measure; if the situation on the market stabilizes the company will not go ahead with the switch to a four-day week and "will continue to work as usual." But if the situation does not stabilize, switching to a short week will enable the company to avoid layoffs and ensure stable utilization of production facilities.

One possible problem that could be caused by sanctions is a disruption in supplies of imported components, including for engines, the paper said. Gazel light commercial vehicles are equipped with Evotech engines from the Ulyanovsk Motor Plant, which is owned by GAZ according to SPARK data, and Cummins diesel engines. A problem has arisen with supplies of imported components for Evotech engines, the paper reported, citing market sources.

The company now expects that the light commercial vehicles (LCV) market could shrink by 15% in 2019. Sales already fell by 8% in the first seven months of the year. If the forecast comes true, production will drop by about the same amount, a Kommersant source said.

GAZ believes that the market is being negatively affected by high interest rates, the reduction of state support, inflation, reduction of capital investment and the completion of major federal construction projects.

"All this is having a negative impact on purchasing power. There is a slump in the investment and operating activity of small and medium businesses, the main users of commercial transport," the paper quoted a source at the company as saying.

GAZ was put on the U.S. Treasury Department's Specially Designated Nationals List in April 2018, along with Deripaska and a number of other companies controlled by the billionaire. Two deadlines were set for the company: to conclude business transactions with it and divest shares and bonds. Subsequently, as a plan was implemented to have Deripaska give up control of the company, these deadlines were repeatedly extended. The latest deadline is November 8, 2019. Deripaska's other companies, Rusal and En+ Group , have already been taken off the sanctions list, as the tycoon has given up control of them.