* Lada maker to cut up to 27,600 jobs
* Cuts agreed with trade union
* Working at 65 pct capacity
* Share price falls 4.6 pct
(Adds share price)
By Rimma Mikhareva
TOGLIATTI, Russia, Sept 24 (Russia) -, Russia's largest carmaker, said it would cut over a quarter of its workforce to cope with plunging demand in a market that had been expected to become Europe's biggest before the financial crisis.
, part-owned by French car maker , said on Thursday it had agreed with trade union leaders to cut up to 27,600 jobs at the plant on the Volga river where the iconic Lada has been produced since Soviet times.
Sales of new cars in Russia fell 54 percent year on year in August. The sharp drop in demand that has accompanied salary and wage cuts has scuppered Russia's hopes of overtaking Germany as Europe's biggest car market this year.
The Association of European Businesses expects 1.4 million cars to be sold in Russia this year, down from 3.2 million in 2008.
The AvtoVAZ job cuts, which follow mass protests in the city of Togliatti, are the latest challenge to Prime Minister Vladimir Putin in his attempts to keep a lid on simmering unrest in one-factory towns hit by Russia's first recession in a decade.
"It's hard to find another job in Togliatti. AvtoVAZ is everything for this town, and nobody is waiting for us in other cities," said assembly line worker Alexander Afanasyev.
AvtoVAZ, also part-owned by state conglomerate Russian Technologies, has halved salaries and reduced the working week at the plant in Togliatti, a city 900 km (560 miles) southeast of Moscow built in the 1960s to serve the car plant.
"The enterprise is working on one shift and at 65 percent of capacity. Cutting personnel is essential in such a situation," AvtoVAZ, which employs 102,000 people, said in a statement.
AvtoVAZ said its president, Igor Komarov, met on Wednesday with the company's main trade union. A plan to reduce the workforce to an optimum 75,000 was discussed at the meeting.
Aton analyst Mikhail Pak estimated that AvtoVAZ could save approximately 8 billion roubles ($266.7 million) a year by cutting its workforce by 27,600.
The company's Moscow-traded stock closed down 4.6 percent, while the wider MICEX index traded largely flat.
FALLING CAR SALES
Unemployment in Russia has eased in recent months, falling to 6.2 million, or 8.1 percent of the workforce, in August from 6.3 million in July. But analysts have warned job losses might rise again as companies plan autumn layoffs. [ID:nMOS005540]
About 2,000 workers protested in Togliatti last month, demanding the state nationalise the car plant after management cut wages. Deputy Prime Minister Alexander Zhukov has called for special measures to save jobs. [ID:nL6144441] [ID:nLA369832]
AvtoVAZ said those to be dismissed would include 13,000 pensioners, who are expected to leave in September or October, as well as 5,500 people approaching pensionable age.
The company said around 6,000 of the 9,100 younger workers to be laid off "would once again be required" from the start of 2012, when AvtoVAZ andplan to launch a joint project. ($1=30.00 Rouble) (Additional reporting by Robin Paxton and Gleb Stolyarov in Moscow; Editing by Jon Loades-Carter and Elaine Hardcastle)