Exclusive-Russia's industrial titans furlough workers as its war economy stalls

By Anastasia Lyrchikova and Gleb Stolyarov

MOSCOW (Reuters) -From railways and automobiles to metals, coal, diamonds and cement, some of Russia's biggest industrial companies are putting employees on furlough or cutting staff as the war economy slows, domestic demand stalls and exports dry up. 

The efforts to reduce labour costs show the strain on Russia's economy as President Vladimir Putin and the U.S.-led NATO military alliance square off in Ukraine, Europe's deadliest conflict since World War Two.

Reuters identified six companies in Russia's mining and transport sectors, many of them industrial titans, that have cut their working week in an attempt to reduce wage bills without raising unemployment, according to industry sources.

Cemros, Russia's biggest cement maker, has moved to a 4-day week until the end of the year to preserve staff amid a sharp downturn in the construction industry and a rise in cement imports. 

"This is a necessary anti-crisis measure," said Cemros spokesman Sergei Koshkin. "The goal is to keep all our staff." The company has 13,000 employees and 18 plants across Russia.

Koshkin said increased imports from countries including China, Iran and Belarus, combined with a drop in new houses being built, had curbed demand for cement. Cemros expects Russia to consume less than 60 million tonnes of cement this year, a figure last seen during the COVID pandemic.

The push to reduce wage bills shows the toll that conflict in Ukraine and Western sanctions are taking on corporate Russia and on the workers of its heavy industry plants, many of which were founded during Josef Stalin's industrialisation of Soviet Russia in the 1930s.

Russia's ministries of Labour and Industry did not respond to requests for comment on Reuters findings. The news agency reported in January that Putin had grown increasingly concerned about distortions in Russia's economy, including the impact of high interest rates on its non-military sectors. 

Russia's Center for Macroeconomic Analysis and Short-term Forecasting - an influential research non-profit - said sectors of the economy not connected with the military had contracted by 5.4% since the start of the year. The Center forecasts a major slowdown in GDP growth to 0.7%-1.0% this year. 

During Putin's first two terms as president from 2000 to 2008, Russia's economy soared to $1.7 trillion from less than $200 billion in 1999. 

But Russia's nominal GDP is now $2.2 trillion, about the same level it was in 2013, the year before Russia annexed Crimea.

In 2022, the year Putin ordered troops into Ukraine, the economy contracted 1.4%, but then outperformed the average of the G7 group of leading industrial nations by growing 4.1% in 2023 and 4.3% in 2024. Growth this year is forecast by the economy ministry to fall to just 1.0%.

Amid a tight labour market, unemployment has fallen to a record low of 2.1% of the workforce, according to state statistics. 

Putin has publicly rejected warnings from senior bankers that Russia's economy is stagnating. He says the government is slowing the economy to keep control of inflation - forecast at 6.8% this year. 

CHINESE IMPORTS, HIGH RATES, SANCTIONS 

Companies are struggling with a growing list of problems ranging from high interest rates and the strong rouble, falling domestic demand, weak export markets due to sanctions, and cheap Chinese imports, according to economists. 

Russian Railways, which has 700,000 employees, has asked staff in its central office to take three additional days off per month at their own cost, in addition to normal holidays and non-working days, two sources told Reuters.

Long seen as a mirror of the Russian economy - particularly its commodity exports - the company's revenues are declining as shipments of coal, metals and oil drop, economists said. Russian Railways declined to comment.

The Gorky Automobile Plant (GAZ), a leading manufacturer of vans that employs at least 20,000 people, moved to a 4-day week in August, as did truckmaker Kamaz, with around 30,000 employees.

The trade union at Avtovaz, Russia's biggest carmaker with some 40,000 employees, confirmed to Reuters that it started a 4-day-week from September 29. The company, which said in July it was considering the move, declined to comment. 

A GAZ spokeswoman said the company resumed a 5-day week from October. Kamaz said its situation had not changed and declined additional comment.  

Alrosa, the world's largest producer of rough diamonds, has cut its payroll for all staff levels not directly involved in mining by 10%, partly by shortening the working week. It also paused operations at less profitable deposits in spring and summer. Alrosa told Reuters it had sought to minimize layoffs, but did not specify how many employees had been let go.

Across plants in the metals, mining, timber and coal industry there have been cuts to the working week, staffing or production, according to industry sources and company statements. 

Sveza, one of Russia's leading timber and paper companies, shuttered a plywood mill in Tyumen, a Siberian city 1,700 km (1,056 miles) east of Moscow, last month due to a sharp decline in furniture demand, the region's prosecutor said. More than 300 people lost their jobs. Sveza didn't respond to a request for comment.

Signs of stress are appearing in Russian state statistics.

Overdue salary arrears in Russia at the end of August amounted to 1.64 billion rubles, an increase of 1.15 billion rubles, or 3.3 times, compared to the same period last year.

The geography of Russian heavy industry - often the dominant employer in cities and towns across European Russia and the Urals - means that wage cuts can have a significant impact on regional prosperity.

GOVERNMENT FORCED TO PROVIDE SUPPORT 

In previous downturns, Russia has bailed out major employers to stem discontent in many of the industrial towns and cities that often rely on one major enterprise. 

Russian Railways and the country's car manufacturers received state support during the 2008-2009 global crisis to avoid mass lay offs. In 2022, Russia told car factories to furlough, not fire, staff.

The current economic strains have already forced the government to intervene across the economy, from shoe manufacturers to coal and metals, offering discounts on rail transport, deferral of taxes and targeted state support.  

The coal sector, which employs about 150,000 people, has been badly hit as exports decline, according to Russian officials.

Deputy Prime Minister Alexander Novak told Putin in April the sector's financial health was deteriorating, with 30 enterprises - employing roughly 15,000 people and producing around 30 million metric tons annually - at risk of bankruptcy.

In Siberia's Kuznetsk Basin, or Kuzbass, which holds some of the world's biggest coal deposits, local officials said in September that 18 out of 151 enterprises had been shuttered.

Alexander Kotov, a partner at Russian consulting agency NEFT Research, told Reuters that 19,000 coal workers were laid off in the first half of 2025.

"If we don't start saving the coal industry urgently, it could be hit by a wave of crisis," Kotov said. 

Mechel, one of Russia's biggest coal miners, reported worsening losses in August and said it had suspended output at one of its mines and cut operations that did not make a profit.

One source with knowledge of the industry told Reuters on condition of anonymity that Mechel cut staff this summer. Mechel declined to comment. 

Vladimir, a coal miner in Kuzbass, told Reuters his salary had been reduced.

"I'm now in a higher position, but I'm earning less than I did before in a lower one," said the miner, who declined to give his second name.         

He said there was enough to live on and some workers had found work in other regions, but the coal sector was struggling.

"Wages have been cut everywhere, absolutely everywhere in Kuzbass," he said. "They say it's the crisis: coal isn't in demand."

STEEL INDUSTRY UNDER STRAIN  

In Russia's vast steel industry, too, there are signs of trouble. Russia is considering a moratorium on bankruptcies in the metals industry and a host of other measures, according to a protocol from the government's Financial Stability Commission meeting on August 28.

Russia is the world's fifth-largest steel producer, with an output of about 71 million tons in 2024. 

"There is a quiet cutback going on in the metals industry," said one source close to the industry, blaming high interest rates, a strong rouble and weak demand at home and abroad.

While the industry was not moving to a four-day week yet, the source said, almost all metal processing plants were cutting auxiliary staff. 

A second source said the industry had too many employees for the current environment but it wanted to avoid mass lay offs.

"They would prefer to introduce a 4-day week but so far none of the big players have," said the second industry source. 

(Editing by Guy Faulconbridge and David Lewis)