GM's Opel Hunkers Down in Russia

FRANKFURT--Opel, the German unit of General Motors Co., plans to reorganize its operations in Russia where demand for new cars has slumped amid a worsening domestic economy marked by the falling value of the ruble and economic sanctions imposed by western countries.

"Last year Russia was our third largest market after the U.K and Germany [but] now this market is embroiled in serious turbulence," said Karl-Thomas Neumann, the head of Opel, said on Tuesday.

Tensions and sanctions related to Ukraine crisis and Russia's limp currency have been a source of increasing concern to European companies, in particular German car makers that do significant business with Russia. Earlier this month, Volkswagen AG said it would reduce production at its Kaluga, Russia, plant for 10 days due to economic weakness.

"We believe in the long-term potential of Russia, but volumes and prices are under considerable pressure at the moment and the ruble continues to lose value," Opel's Mr. Neumann said.

He said the turmoil will continue to influence Opel's results in the region, so the company is taking measures now to minimize the effects, and is keeping an eye on market developments.

Opel will scale back operations at its St. Petersburg plant to one shift, and offer employees a severance package, it said. The car maker will also intensify its concentration on local suppliers "to better serve the plant's needs," Opel said.

Opel is also appointing Susanna Weber to head operations in the country, effective immediately. Until now, Ms. Weber was responsible for purchasing and logistics at Opel.

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