If there is a country that truly needs a car czar, it is Russia, home of the czars — and Lada.
The factory here has been stamping out the same version of the Lada, the typical boxy people’s car of the former Eastern Bloc, for four decades.
Known as Avtovaz for short, it is one of the least efficient automobile factories anywhere in the world — each worker produces, on average, eight cars a year, compared with 36 cars a year at General Motors’ assembly line in Bowling Green, Ky., for example.
Yet the government is giving Avtovaz (pronounced aft-OV-az) billions of dollars in aid, no strings attached. No chief executive firings. No renegotiation of workers’ contracts. No demands to turn out better-quality cars, much less fuel-efficient hybrid cars. (The first car with an airbag was introduced here in 2005.)
But the auto bailout, Russian style, is intended more to ensure peace in the streets than restructure a business, much to the lament of some critics who think tough love might be better.
“The key issue is too much government protection,” Yegor T. Gaidar, a former prime minister, said. “The factory will create as many problems for the Russian economy as General Motors for the States.”
Moscow’s concerns extend far beyond automobiles. As mounting economic anxiety prompts worker protests from China to Ukraine to the Czech Republic, politicians and economists say the Kremlin is calculating that it can keep the peace by bailing out Russian workers.
The country’s manufacturing base, wobbly in the best of times, is contracting quickly in the global downturn. Layoffs are spreading. Manufacturing declined by 13 percent in February alone. And industrial discontent is stirring in the most hardscrabble Russian factory towns.
On March 11, 16 Russian steelworkers announced a hunger strike to protest wage cuts at a Ural Mountain mill. (The same week Severstal, one of Russia’s largest steel makers, announced it would lay off 9,000 to 9,500 workers.)
Here in Tolyatti, when a G.M. joint venture laid off 400 people in December, riot officers were called in to disperse an angry crowd that had gathered in the plant parking lot.
It is a trend with a history here; a shrinking manufacturing base in the late Soviet period contributed to social unrest. To keep that from happening now, government officials promised at a meeting here last week to give additional aid to the factory: $730 million in an interest-free loan for one year, $230 million in loans from state banks at a favorable rate, and a commitment by state-owned banks to help Avtovaz raise an additional $2.6 billion from banks.
“Avtovaz, along with producing cars, is fulfilling a social role. It is employing the population. Either fortunately or unfortunately, the state must support Avtovaz,” Vladimir R. Yagutyan, a former deputy mayor of Tolyatti, said in an interview. “The stability of the town depends on it.”
Apart from the company’s role as an employer, economists see little point in propping up such an aging giant.
The factory, a monument to Soviet gigantism in industrial design, is a panoramic sprawl of pipes and smokestacks on a bank of the Volga River, 460 miles southeast of Moscow. It employs 104,000 assembly line workers, many of whom still toil with hand-held wrenches.
All told, the Avtovaz factory and its suppliers support two million jobs, according to a statement by the factory’s management, out of a total Russian work force of about 75 million. Many of those jobs are in small and medium-size towns not far from Moscow.
The collapse of the car market came later in Russia than in the United States, but it could be more severe. Russia had been the fastest growing major car market in the world, with 35 percent growth in 2007. The country was projected to surpass Germany as Europe’s largest automotive market in 2009; that is no longer the case.
Now car sales are projected to fall 25 to 50 percent, or 1.6 million to 2.3 million vehicles, according to a report by the Moscow office of PricewaterhouseCoopers.
Last fall, the Russian government deftly shifted the economic hardship away from this politically fragile car industry belt in central Russia. It imposed a tariff on imported cars. The move set off protests and a police crackdown — but in Vladivostok, a major center for importing and servicing secondhand Japanese cars, more than 5,000 miles from Moscow.
Now, the government is backing a no-layoff policy at Avtovaz, in spite of tumbling demand for its products. The government is also subsidizing auto loans to stimulate demand. The factory has requested state loan guarantees, which were approved last week.
Even employees forced to take furloughs seemed unconcerned about being laid off. “The factory is our wet nurse,” Denis N. Makarov, a clerk in the factory office, said. “We have nothing else. If it stops, the whole town will be out on the streets. We all understand this.”
Still, Timofey G. Bushuyev, 59, a sheet metal worker, said he understood the factory’s troubles last year when he bought a new Lada only to discover the horn and heater did not work and the belts squeaked.
In a possible silver lining for Avtovaz, more expensive foreign brands have fared worse. G.M., Hyundai and Toyota, all companies with assembly lines in Russia, were among the biggest losers.
Avtovaz’s management, in a written response to questions, hailed the company’s “indisputable advantages” in a downturn owing to its inexpensive product line. The car now marketed as the Klassika — a design for the squared-off Fiat 124 that the company bought in 1974 — sells for $4,160.
“In crises Avtovaz always had a product people wanted to buy,” the company said. “From the onset of the crisis Avtovaz has not laid anybody off, and does not plan to do so.” Instead, the factory has gone to a four-day week, with two six-hour shifts. Workers are offered voluntary furloughs at two-thirds pay.
But even the unions, used to believing the worst of management, say layoffs are inconceivable here.
“It would become a political issue for this city and this country,” Andrei A. Lyapin, regional coordinator of the Interregional Trade Union of Automotive Workers, said in an interview. “They will print enough money to pay these people.”