At Volkswagen’s Kaluga plant, an industrial city 180km south of Moscow, the car park is full of new cars, but the factory is almost empty after production was halted last month.
Volkswagen is one of three carmakers in the city that have shut down due to the effects of the Russian invasion of Ukraine and the impact it has had on the global supply chain. According to Yale School of Managementmore than 750 companies withdrew from Russia or limited their businesses after the invasion.
“The problems started when we stopped getting parts,” said Valery Uglov, who works as a car mechanic at the Volkswagen plant. “We can’t really assemble a car without parts.”
Volkswagen, along with Volvo and Stellantis, a Dutch manufacturer whose models include Peugeot and Citroen, together employ 7,000 people in the city.
Although so far all workers receive at least part of their wages, it is unclear when they can return to work and how foreign corporations will function forward in Russia, given that it is increasingly isolated from the global market through sanctions.
Since Russia invaded its neighbor on February 24, thousands in Ukraine have been killed, cities and towns have been reduced to rubble, and more than five million people have fled abroad. The invasion also shattered world trade, and as more and more countries banned Russia’s energy exports, commodity prices soared.
The World Bank predicts that Russia’s GDP will shrink by 11% this year.
New cars seen parked at Volkswagen Group Rus plant in Kaluga, Russia, March 30, 2022 (Evgenia Novozhenina / Reuters)
Production has stopped
In Kaluga, a city of 320,000, most people who spoke to CBC News said they were not particularly concerned about shutdowns at the car factory and believed the setbacks would be short-lived.
Uglov’s colleague, Alexander Abrosimov, has worked for Volkswagen for 12 years and said he always has concerns when it comes to working in the automotive sector. He said there were cuts during the first days of the pandemic and said it would also be temporary.
“It is good that Europe and the United States are not the whole world,” he said, given that most sanctions come from the West.
“We still have Asia … and I guess we’ll work with them.”
IN statement Published online, Volkswagen said it had stopped production in Kaluga and Nizhny Novgorod, 400km east of Moscow, since early March due to the “overall situation” and “great uncertainty and turmoil”.
The company also stopped exporting its vehicles to Russia. Volkswagen, which has some suppliers in western Ukraine, said it was fully imposing sanctions.
The statement said the situation in Ukraine, along with sanctions and counter-sanctions, made it difficult to transport parts and supplies. Rail and road routes have been cut off and many shipping companies have refused to stop in Russian ports.
Russian Prime Minister Vladimir Putin walks in front of a Volkswagen Tiguan during the opening ceremony of Volkswagen’s Kaluga plant on October 20, 2009. In early March, Volkswagen said it had stopped production in Kaluga due to Russia’s invasion of Ukraine. (Natalia Kolesnikova / Reuters)
The automotive sector is struggling
Evgeny Eskov, editor-in-chief of the Moscow-based AutoBusiness Review, told CBC News that the impact of the sanctions on Russia’s car sector was “huge.”
He said most of the country’s car plants are not working at the moment, as the Russian car sector is closely linked to foreign companies. According to European Business Associationcar sales in Russia fell by nearly 63% this March compared to March last year.
The Russian government has repeatedly said it will innovate and find other suppliers.
In a speech to lawmakers in St. Petersburg on April 27, Russian President Vladimir Putin said Russia would “oppose any harsh and often inappropriate external restrictions” and that many of Russia’s industries are now seeing “opening up good, new and modern opportunities.” . “
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But Eskov does not think it will be so easy for Russia to smooth over its supply chain problems.
He says that while Russia may be able to procure parts from a “friendly” country, the challenge will actually be to bring them into Russia.
It will all depend on how long the special operation in Ukraine lasts, “Eskov said. “It is clear that factories cannot stay idle for a long time, they have to do something.
French carmaker Renault has a 68% stake in Russia’s largest carmaker AvtoVAZ, which produces the best-selling Lada, but on April 27 Russia’s trade minister announced that Renault had agreed to sell its stake to a Russian research institute for one. ruble.
The Ministry of Trade also announced that Renault’s factory in Moscow, which produces Renault and Nissan brands, will be handed over to the city government.
Russia has warned that it could expropriate foreign assets if companies withdraw from Russia, and in an online statement, Volkswagen said it was watching the discussions with concern.
Fear of prosecution
A tire factory in Kaluga, owned by German-based multinational manufacturer Continental AG, has said it has restarted part of its production because it is concerned that local officials could be subject to criminal sanctions.
In a statement to CBC News, Mark Sidler, who works in media relations for Continental AG, said that the company was taking this step to “fulfill its obligation to take care of employees in Russia” and that Continental’s decision to restart was “No” motivated by profit.
The company does not want to clarify what criminal sanctions it is concerned about, but the State Duma of Russia is considering bill which could allow prosecutors to prosecute local managers or directors for imposing sanctions
In a statement, Continental told CBC that it was temporarily resuming production at its Kaluga tire factory because the company feared its employees could face criminal sanctions if Continental did not meet local demand. (Dmitry Kozlov / CBC)
“We survived with bread and potatoes and we will survive this”
However, many Kaluga residents said they were optimistic about the future. In addition to the automotive sector, the city has a number of other factories, including those that produce railway equipment and electronics.
“We need to start producing our own things in these factories,” said Viktor Petrovich, who spoke to CBC News in the city center.
Several residents told CBC News that they had noticed an increase in food prices since the war and that there was a shortage of Russian basic products, including sugar and buckwheat, but Petrovich was not too worried.
“In the 1990s, we survived on bread and potatoes and we will survive that.”
A large Z poster hangs on a building in Kaluga. The letter has become a symbol of support for what Russia calls its “special military operation.” (Dmitry Kozlov / CBC)
In Kaluga, large posters hang on the sides of buildings with the letter Z, which has become a symbol of support for the Russian 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 depicting a decorated military hero stands by one of the boulevards where a young family has stopped filming.
Many in the city have a strong sense of patriotism, but not a middle-aged woman who stopped talking to CBC News and will only give her first name.
“I don’t think anything good awaits us,” she said.
“Everyone around me supports the war and says we will survive the sanctions, but I am the complete opposite. I am against the war.”
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