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BERLIN (Reuters) – Michelin (PA:MICP) and BMW were among the latest companies on Wednesday to warn of disruption to their businesses from Russia’s invasion of Ukraine, while ad group Publicis said it had handed over control of its Russian subsidiary to protect its staff.
The list of Western companies that have suspended operations or pulled out of Russia is growing by the day after the West imposed sanctions aimed at curbing Moscow’s access to funding.
Germany’s BMW joined other carmakers in detailing the impact of the unfolding crisis in Ukraine on its operations as it downgraded its profit margin forecast.
Russia’s invasion of Ukraine and COVID-19 related disruptions in China have forced carmakers from Toyota to Tesla (NASDAQ:TSLA) to shutter plants and raise prices, with many warning of further pain if circumstances do not stabilise.
BMW said that while it was still able to source some parts from western Ukraine and was engaging alternative suppliers to keep up production, further interruptions were to be expected in coming weeks.
France’s Michelin, which was the first international tyre maker to start manufacturing in Russia in 2004, suspended production at its plant in Davydovo which employs about 750 people.
“There is a lot of supply difficulties – which means we have disruption of financial flows, and there’s a problem of currency instability,” it said.
Michelin said its priority was supporting affected employees.
Zara owner Inditex (MC:ITX), which has stopped trading in Russia, said on Wednesday its objective was to “resume operations in Russia and Ukraine as soon as circumstances allow”, adding that it was still paying salaries to employees in the country.
PROTECTING STAFF
Multinationals from consumer goods companies to professional services suppliers have said they have to consider their staff in Russia and ramifications from any move to cut ties with the country.
Russia has taken the first steps towards allowing the nationalisation of foreign-owned factories that shut operations, a move that further complicates the transfer of ownership of assets for Western companies.
British American Tobacco (NYSE:BTI) told Reuters on Friday that exiting its business or stopping manufacturing could be regarded as criminal bankruptcy by Russia and lead to action against local management.
“There’s no way, consciously, we can expose our people to criminal sanctions,” the Camel and Lucky Strike maker said.
BAT (LON:BATS) and rival Imperial Brands (OTC:IMBBY) are looking to transfer their businesses in Russia to local third parties.
French ad group Publicis, which had been quiet about the impact of the conflict, said it was handing control of its operations to Sergey Koptev, founding chairman of Publicis in Russia, effective immediately.
Publicis is among the first Western companies to transfer legal ownership of a Russian subsidiary.
It said it was ceding ownership with the clear contractual condition of ensuring a future for its employees in the country.
“We were determined to take the necessary time to come up with a solution that was truly people-first, because our 1,200 employees in Russia are our people too. We couldn’t just abandon them,” Chief Executive Officer Arthur Sadoun said.
Bigger rival WPP (LON:WPP) said earlier this month it would discontinue its operations in Russia. It said it would support its staff and work closely with clients and partners as it withdrew from the country.
