AP reported that Carmaker IzhAvto has filed for bankruptcy, leaving about 5,500 jobs on the line.

IzhAvto filed last week, according to documents posted on the web site of the Arbitration Court in Udmurtia, where the company is based.

IzhAvto, the region’s major employer with nearly 5,500 people on the payroll, assembles vehicles for South Korea’s KIA and AvtoVAZ.

An IzhAvto official said the company will try to restructure its financing rather than fold its operations. The official spoke on condition of anonymity because the company is withholding comment until proceedings commence.

A separate source close to the company’s management, who also spoke on condition of anonymity, confirmed that intention.

IzhAvto has been incurring losses since the third quarter of 2008, according to the Audit Chamber, which attributed the company’s poor performance to its management’s “inefficient financial policy.” As of April, its debt stood at RUB 11.3 billion. Sberbank, the car plant’s major creditor, is keeping IzhAvto’s controlling stake as collateral.

Some 2,000 people have been paid to leave their jobs at the plant. The company source said that the management hopes to avoid laying off the remaining 3,500.

The local car market appears to be particularly vulnerable. New car sales dropped a staggering 58% in July following a 56% YoY drop in June.

Most Russian car producers were loss-making even before the global downturn because of the vehicles’ relatively poor quality. The factories’ operations were in most cases uninterrupted as the industry remained largely subsidized by the federal budget.

(Sourced from AP)