Russia to bail out GM’s joint venture partner AvtoVAZ

The USA is not the only country that finds its auto industry in trouble. The following article is from Pravda. I am blogging this as a Russian auto manufacturer has a joint venture arrangement with General Motors who owns 41.5 percent of the company.

Putin buys Russian car to save home industry from decline

30.03.2009 Source: Pravda.Ru

Russia’s Prime Minister Vladimir Putin decided to personally support the Russian automobile production, Interfax reports. Putin told reporters that he had recently purchased a Niva vehicle of Russia’s AvtoVAZ giant.

When asked which Russian car he would like to own, Putin said that it would be Niva. “I have already bought it. I am working on the papers right now,” he said.

Putin is currently on a visit to the city of Togliatti, the center of the Russian automobile industry. He held a meeting with the workers of AvtoVAZ and promised them that the government would take serious measures to support the home car industry. “We have decided to assign 700 million rubles ($21 million US dollars) to maintain the jobs in the industry. About 300 million more have been assigned for the development of small and medium businesses,” Putin said during the meeting at AvtoVAZ.

The Russian government is currently considering an opportunity to give over 20 billion rubles ($600 million US dollars) to AvtoVAZ, Russia’s major car maker. The final decision on the matter will be made on March 30. AvtoVAZ asked for 26 billion rubles of bailout, Itar-Tass reports.

Putin said that the financial support of AvtoVAZ would let the company attract other credit resources in the amount of 90 billion rubles. The prime minister added that the enterprise would need first to solve all problems with its 40-billion-ruble debt.

Putin believes that the reduction of the ruble rate against the dollar would let the company make competitive products. “It considerably increases your competitive ability. The consequences of that can be preserved during the coming two or three years. The enterprise must use the situation during this period to achieve a new level of production,” he said.

Juice readers. What do we know about this General Motors/Russian partnership automobile factory anyway? Wikipedia data from 2005 follows:

As AvtoVAZ was allowed to sell cars to private dealers in late 1980s, Boris Berezovsky arranged to resell the cars to the public through his LogoVAZ dealerships. In 1993 he started a campaign to collect funds for the “people’s automobile” and created the AVVA venture, which stands for All-Russian Automobile Alliance; the AvtoVAZ held a major share in the venture. The plans were to build a completely new plant for production of the VAZ-1116 supermini. However, the financial crisis of 1998 put these plans to an end. The development concepts of 1116 instead became the foundation of the Lada Kalina range. GM-AvtoVAZ, a joint-venture with General Motors, adopted an updated version of the Niva, VAZ-2123, that was considered for production since the 1990s. Named Chevrolet Niva, it’s being built on the venture’s plant since 2001 and is exported to Europe and Latin America. In 2004, the Chevrolet Viva, a four-door version of the Opel Astra G, was introduced. VAZ has also tried to get into the sportier markets: several Ladas were factory-tuned and given a Momo steering wheel. A convertible was also produced. In 2003, VAZ presented the concept car Lada Revolution, an open single seater sports car powered by a 1.6 L engine producing 215 hp (160 kW). There are other experimental cars, such as the VAZ-210834 Tarzan SUV concept, VAZ-1922 monster truck and VAZ-2359 pick-up, all based on Niva. The VAZ-211223 110-series coupe, with the sister models 111 and 112 have been developed with a modern and luxurious look and feel, have been mass produced, and are popular in Russia today.Some models (mostly the police version) have a Wankel-type engine (like the Mazda RX-7), though development of this engine has since stopped. The main causes are special requirements for service and repair (mostly available only in Moscow & Toliatti) and very high fuel & lubricating oil consumption.2005 saw the introduction of the new Kalina supermini lineup to the market. AvtoVAZ has built a new modern plant for this model and is hoping to sell some 200,000 cars annually. Test production of the Lada 1118 sedan started in November 2004 and full-scale assembly was launched in May 2005. The Lada 1119 hatchback and Lada 1117 station wagon with updated DOHC 1.6L engines are to follow in 2005–6.The restyled 110-series model, Lada 2170 Priora, is set for production in Q3 2006.AvtoVAZ was considering the local production of Ecotec Family 1 (FAM-1) engines using the equipment transferred from Szentgotthard, Hungary plant. A transmissions plant was to be bought from Daewoo Moto India, a former Daewoo Motors subsidiary that was not sold to GM. The engines and transmissions were to be used in both GM-AvtoVAZ and Lada cars. As of Summer 2005, these plans are cancelled and VAZ is seeking another way to acquire some modern powerplant technology.After some shakeups in the management caused by a recent acquisition from Rosoboronexport, AvtoVAZ is currently in talks with Renault to negotiate a CKD assembly of the Renault Logan. They have also contracted Magna International to design a new car platform and equip a new plant for its production.

Note: I do not have an update on the bailout promised by March 30th.

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