Executives at Avtovaz, the largest Russian car factory, are reportedly considering laying off about 27,000 employees to improve performance at a plant that has been clobbered by the sharp drop in demand for cars this year. The factory, the maker of Lada cars, is one of the least efficient in the industry, a behemoth built by the Soviets that was never fully reformed and had never, until now, contemplated laying off considerable numbers of its huge workforce. The layoff plan was reported Tuesday by Interfax news agency, which cited comments made by a vice president, Igor Komarov, at a meeting with regional officials. The report named a precise number of cuts: 27,691 jobs.

The Echo of Moscow radio station cited a company representative saying the cuts were only a contingency plan if sales do not pick up this year; the company’s press office was not answering calls Tuesday. Any big cuts in the bloated payroll of 103,000 at Avtovaz would surely mark a milestone in the country’s handling of the collapse in manufacturing output during the economic crisis. The government has been reticent to allow factory owners to lay off workers over concern for social unrest. Avtovaz, one of the biggest and most troubled Russian employers, is a test case. Steel mills, tractor plants, mines and construction sites have been idled across Russia and unemployment is rising. In June, Prime Minister Vladimir V. Putin was compelled to intervene after unemployed cement workers in the town of Pikalyovo near St. Petersburg blocked a highway in protest. Pikalyovo is a far smaller city than Tolyatti, where the company is based.

For years, payroll reductions at Avtovaz had been resisted more firmly than reform in Detroit. The factory’s iconic stature had buffered it from restructuring efforts. Fearing street protests by autoworkers in Tolyatti if large numbers were laid off, the government propped up Avtovaz with a $750 million interest-free loan. Andrei A. Lyapin, a coordinator with the Interregional Trade Union of Automotive Workers, said by telephone from Tolyatti that the layoffs appeared a first step in more sweeping changes at the factory, including a possible bankruptcy restructuring.

“They don’t see an exit,” he said. The suggestion of layoffs, he said, followed months of unsuccessful efforts to revive demand for Ladas, and reflected deep and perhaps terminal problems at the plant. The union is planning a street protest on August 6.

Avotovaz was eking by before demand for cars plunged. By January, the company had a hangover of 120,000 Ladas in storage. Production was curbed drastically to a target of 332,000 units in 2009 at a factory designed to produce a million cars a year. Even this may be optimistic, however. In the first six months of the year, the plant built and sold 140,000 cars and also sold another 40,000 from storage, according to VTB, a Moscow bank. Reports in the financial press had telegraphed the coming turmoil at the plant, which is majority owned and managed by the state arms trading monopoly, Russian Technologies. Renault holds a 25 percent stake and deferred questions about the site to Avtovaz. Vedemosti, a Moscow business newspaper, ran an editorial this month saying the plant no longer had the confidence of senior Russian officials and that “there are almost no advocates left for artificially prolonging the life of Avtovaz.” However, there may be a future in spare parts: Russians drive about 13.6 million Ladas, or 33 percent of all cars in Russia, Vedemosti reported. The newspaper also debunked the prospects of social unrest, which had been played up by local officials and factory managers eager for subsidies, and suggested authorities use Tolyatti as a model city for supporting small and medium business to absorb unemployed automotive workers.

Also, the paper pointed out, most of the population of Tolyatti relocated there as Komsomol volunteers in the 1960 and 1970s, when the gigantic factory opened, and do not have deep roots and may be more mobile than other Russian industrial workers.

By NYT