FRANCE: Russian support triples for Avtovaz restructure

27 November 2009 | Source: just-auto.com editorial team

Renault, Russian Technologies and Troika Dialog have reached agreement on Avtovaz restructuring measures that will enable the Togliatti plant to produce 900,000 vehicles per year by 2015, allow Avtovaz to maintain its market share in Russia at 25% and develop export operations.

The shareholders signed a memorandum of understanding in Paris today that will result in debt restructuring, a new product plan and a revised investment plan.

The product plan includes the development of new vehicle ranges adapted to the needs of the Russian market and will be supported by the Russian government, which will increase its financial support for from RUB25bn to RUB75bn (EUR1.67bn) to reimburse bank debt and cover the company's short-term cash needs.

The Samara regional government will take over the payroll costs for the 14,600 employees to be transferred to two Avtovaz subsidiaries while personnel and facilities used for 'social purposes' will be the transferred to federal and local authorities, a statement said.

Renault will contribute the equivalent of EUR240m (RUB10.8bn) in kind through the transfer of technologies, production machinery, equipment and expertise in support of the production of new vehicles based on the BO (Logan) platform.

Renault will also help Avtovaz develop a new entry-level vehicle to replace the Lada Classic and create new powertrain production capacity.

Together with alliance partner Nissan it will use capacity at the Togliatti plant to build vehicles for each brand.

All these measures will help Avtovaz to restore its margin and increase market shares of combined sales of Lada, Renault and Nissan in the Russian market though the Lada brand will constitute at least 70% of the total Avtovaz production volume in Togliatti, the statement said.

The final signing of the agreements is scheduled for March 2010.