Yaroslavl: A Russian Burg Turns Bearish

Tensions rise and hope diminishes in a recently robust city that finds itself grinding to a halt

By Jason Bush

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Yaroslavl, Russia - Tempers are fraying at the Freedom Road job center in the Russian city of Yaroslavl. "It's not my fault your staff is incompetent!" a burly, red-faced man in a fur hat shouts at a dour woman behind a desk. People in heavy winter coats crouch over questionnaires, huddle around counters, and cram the corridors waiting their turn. There's shoving and scuffling in the crush.

The agency, it seems, isn't used to handling so many job-seekers. Until recently the biggest problem facing companies in the city of 600,000 was an acute labor shortage. That has all changed. "Companies are cutting back," says Nataliya Kuznetsova, a job counselor at the center. "Everyone who comes here is despondent."

The whole country is now reeling from what Russians call the krizis, or crisis. Moscow was hit hard and fast by the downturn. Now the pain is spreading to far-flung industrial cities such as Yaroslavl, 150 miles northeast of the capital, where auto-parts manufacturers and multinationals Eastman Kodak, Japanese heavy-equipment maker Komatsu, and German publisher Bertelsmann have set up shop.

On the surface, the 1,000-year-old city on the Volga doesn't look like it's facing hard times. Gold-domed monasteries and churches peek out from under the snow. On the busy Moscow Highway, a Home Center hypermarket, showrooms for Ford (F) and General Motors (GM), and new apartment towers stand as testament to Russia's boom.

But look more closely, and the prosperity seems to be fading. In the city center, cafés and bars are empty. Bulldozers and cranes stand idle at a half-built shopping center. And utility bills in Yaroslavl jumped by 30% in January, while inflation overall is running at about 15% annually.

On Oktober Prospekt, on the edge of town, Yaroslavl Motor Works (Avtodizel) is eerily quiet. A sign announces the plant's founding in 1916, while a digital clock and thermometer reveals that the temperature is a brisk -12C (10F) at 1 p.m. The facade still sports a large picture of Lenin, marking an award won during its Soviet heyday. Back then, the factory employed 40,000 workers. It still has 11,000, but on a recent Friday just a few office staffers are on hand. Orders for its diesel engines have fallen by 75% since the summer, forcing Avtodizel to shed 3,000 jobs—more than 20% of its workforce—last fall. Since Feb. 1 the plant has been operating just three days a week.

TWO-WHEELED CAR

The troubles reflect a nationwide industrial paralysis. Avtodizel and other local companies are suffering mightily as vehicle sales are forecast to decline by a third or more this year. "The whole auto sector is standing still," says Renat Chapes, an independent union leader at the plant. Avtodizel largely relies on orders from two big truck makers, Kamaz and MAZ, both of which are also on three-day weeks. Chapes brandishes a sheaf of statistics—management documents, he says—that indicate an additional 3,000 layoffs are in the cards. Avtodizel's management declined to be interviewed.

The woe goes far beyond autos. Yaroslavl's big chemical and metal-working plants have seen output slump by more than half over the past year, reflecting plummeting exports and a nationwide slowdown in construction. Even the city's renowned symphony orchestra was forced to dismiss three cellists and several support staff. Conductor Murad Annamamedov fumes at the "imbeciles and idiots" responsible. "To a bureaucrat, it doesn't make any difference," he says, "but it's like taking two wheels away from a car!"

Tension is rising across Russia. In many cities, including Yaroslavl, angry workers have staged demonstrations in recent weeks. Most have been small, but in Russia any protest is unusual. "You shouldn't lay off people so quickly," says Yuri Lichenko, a mechanic who just lost his job at Avtodizel. "Workers," he says as he fills in forms at the employment center, "are losing a lot."