Russia’s GAZ Group has abandoned a plan to buy a 50% stake in Italian diesel engine producer VM Motori, Russian business daily Vedomosti reported on Friday.
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GAZ Group had failed to pay Penske Corporation in the US for the stake and the deal has been cancelled, the daily reported, citing spokespeople for GM Powertrain and GAZ Group, according to Prime-Tass.
GM owns the other 50% of VM Motori and had been expected to team with GAZ to launch production of the Italian engines in Russia.
The GAZ Group spokesman said the Russian company was not interested in the stake any more amid falling demand for light commercial vehicles (LCVs). Also, better offers could be available for GAZ Group as valuation became cheaper, he said.
GAZ signed a deal to buy the Penske stake in VM Motori last August after several years of negotiations. Analysts valued the deal at US$100m but a GAZ spokesman said it was cheaper.
GAZ affiliate Volzhskiye Motory produces engines for GAZ’s Gazelle LCVs. Earlier another Rusisan company, Sollers, also supplied engines to GAZ but the two could not agree on supply terms for 2009 as GAZ accumulated payables.
GAZ Group comprises 18 plants in Russia and the UK. Russian businessman Oleg Deripaska, best known as the major shareholder of aluminium producer UC Rusal, owns 61%.
The automotive operations include a plant producing the Siber, a model built using previous generation Chrysler model tooling. It had been thought GAZ would offer a VM diesel in that model line.
