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“Bailout” has become an all-too-familiar word as of late, but a Russian auto industry bailout brings an interesting (though not entirely positive) twist to the dreaded word. The goal of this particular bailout is aimed more at social stability than in creating a leaner and more competitive industry for the future. The Russian bailout will focused ensuring employment of autoworkers by avoiding layoffs - in spite of plummeting demand.
Bailouts in the U.S. are conditional on eliminating massive amounts of debt, and wrangling major concessions from autoworkers. The no-strings-attached Russian package will undoubtedly bring stability in the short-term, but will the domestic industry be able to compete against foreign competitors in the long-term? It seems unlikely, but a recent wave of protectionist measures, combined with domestic consumers’ preference for affordable Russian cars might just mean that the nation will be able to maintain the status quo.
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