MOSCOW-Ford Motor Co.'s (F) Russian joint-venture, Ford Sollers,
has put its operation under review and is eying possible production
cutbacks due to weakening economic conditions and a sharp drop in
the ruble accelerated by sanction threats over Russia's occupation
of Crimea, a company official said Monday.
Foreign auto manufacturers have invested heavily in Russia in
recent years, but a 5% decline in overall sales last year because
of a slowing Russian economy followed by further economic
instability following the events in Ukraine has cast a shadow over
the once fast-growing market.
"The ongoing weakening of the ruble puts additional pressure on
the Ford Sollers business. As always, we are constantly monitoring
the overall economic situation and will act according to the
changing environment," the company said in a statement.
A Ford Sollers spokeswoman wouldn't confirm a report in Russian
business daily Vedomosti that the company plans a two-month
shutdown at its Vsevolozhsk factory near St. Petersburg, but said
production scalebacks are among several possibilities being
discussed.
"We are reviewing our operations and are working on a major new
plan," spokeswoman Elizaveta Novikova said. "We have not committed
to anything."
Ford has been one of the fastest growing companies in Russia in
terms of local manufacturing, boosting production to seven lines
from two since the beginning of 2012. But the company saw an 18%
drop in sales in Russia last year as demand for compact cars
declined sharply.
Sales of the Ford Focus, which is produced at the
joint-venture's St. Petersburg plant, fell 27% in 2013, according
to the Association of European Businesses in Russia.
The partnership adjusted production at the plant -- which has a
capacity for 125,000 cars a year and employs 3,000 people --
several times last year, cutting back to two shifts from three and
halting production entirely for almost a month. The moves resulted
in an unspecified amount of layoffs, the company said at the
time.
Analysts and industry experts had long predicted that Russia --
which had seen annual growth of more than 30% in recent years --
would soon surpass Germany as Europe's top auto market. But many
now say they don't expect Russia to pass Germany until closer to
2020.
The market's promise has led several foreign producers to invest
billions in ramping up production capacity a sales slumped in
Europe. In 2012, General Motors Co. pledged $1 billion to bring
capacity within the country up to 350,000 cars a year by 2018.
Later that year, Volkswagen AG committed $1.25 billion to build an
engine factory. Last year, Ford Sollers broke ground on a $274
million engine plant.
And the Renault-Nissan alliance is expected to finalize a $742
million deal to take control of Russia's largest car manufacturer,
OAO AvtoVAZ. Together, the three companies aim to have a combined
capacity of 1.7 million cars by 2016.
Write to Lukas I. Alpert at Lukas.Alpert@wsj.com
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