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GM's Opel to scale back Russia operations as market falls

General Motors' Opel division will cut production in Russia and take steps to shrink its workforce as the carmaker reorganizes business in the country due to falling demand.

Opel said on Tuesday it would scale back operations at its plant in Saint Petersburg to a total of 16 days during the three-month period August to October.

"Russia was our third-biggest market last year after the UK and Germany," Chief Executive Karl-Thomas Neumann said in a statement. "At the moment, this market is locked into severe turbulences."

Fabrice Coffrini | AFP | Getty Images

Auto sales have faltered in Russia this year as slowing economic growth is causing people to put off purchases. Western sanctions over the crisis in Ukraine and the devaluing ruble are causing further strains to carmakers.

Opel said it would move to one-shift operations, speed up localisation of suppliers and offer voluntary severance packages to about a quarter of the plant's 2,000 staff.

The carmaker said it aimed to purchase 60 percent of all parts locally to alleviate cost pressures in St Petersburg.

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Restructuring measures will also involve changes in senior personnel. Susanna Webber, head of purchasing and logistics, will take the helm of Opel's Russian operations with immediate effect, to be assisted by new vice president Andy Dunstan, who previously was the carmaker's managing director in the country.

Still, Opel's planned investments in parent GM's joint venture with Russia's top carmaker Avtovaz will not be impaired by the changes, Neumann said.

"We are monitoring market developments very closely and adjust our expansion plans," the CEO said.

"We believe in the long-term potential of Russia but volume and prices are under strong pressure and the ruble keeps devaluing. We're now taking steps to minimize the risk and stay on course."