Volkswagen To Close Russian Plant For 10 Days On Slowing Economy

By Kathleen Caulderwood@katcaulderk.caulderwood@ibtimes.com
on September 07 2014 1:25 PM

Russian President Vladimir Putin, who was Prime Minister at the time, walks in front of a Volkswagen Tiguan during an opening ceremony of a Volkswagen plant in Kaluga October 20, 2009. On Sunday, the German automaker said it would halt production at the plant, citing the deteriorating economic situation. REUTERS/Natalia Kolesnikova/Pool

Volkswagen AG (ETR:VOW3) said it plans to halt production at one of its Russian plants as the economic situation in the country continues to deteriorate.

Europe’s largest automaker said on Sunday that “the general economic situation in Russia” contributed to its decision to

reduce production volumes for 10 days at a plant in Kaluga, about 90 miles outside Moscow, starting on Monday, “as a measure of flexibility,” according to the Wall Street Journal.

While the company cited its commitment to the Russian market, it hasn’t been performing well. As global Volkswagen sales increased 6.7 percent last month, the Frankfurt-based firm saw its Russia sales fall 10 percent.

The Russian economy has been faltering this year as the ongoing conflict with Ukraine has caused the European Union and the United States to issue various sanctions against some of Russia’s biggest companies and banks.

In the first quarter of 2014, Russia’s economy grew just 0.9 percent, down from a 2 percent increase the quarter earlier. In July, the International Monetary Fund downgraded its Russian economic growth forecasts from 1.3 percent to just 0.2 percent for 2014.

“Activity in Russia decelerated sharply as geopolitical tensions further weakened demand,” the IMF said in a report, adding that “investment is expected to remain weaker for longer, given geopolitical tensions.”