OAO GAZ, the second-biggest automaker in Russia, aims to boost production of diesel motors licensed by Steyr-Daimler-Puch AG (SDP) of Austria from roughly 4,500 in 2000 to 20,000 in 2001, while upgrading the power plants to current regulations from Western Europe, officials from the companies told just-auto.com.

By 2005, GAZ hopes to build 200,000 engines annually, featuring two, three, four, five and six cylinders. This range, dubbed GAZ-560, would be diverse enough to drive all of the automaker's existing and planned cars and commercial vehicles. GAZ now can build circa 35,000 motors a year. [The 560 family is based on Steyr's engine M1, designed in the early 1980s for a joint venture with Bayerische Motoren Werke AG (BMW). But the cooperation was abandoned, and the power plant never was used in a mass-produced vehicle, until GAZ began installing the engine in vans in 1996.]

Immediate objectives

"Our present target is to create annual capacity for 50,000," GAZ president Nikolai Pugin said. "We still need to purchase machinery, and this depends on our financial situation, but the Steyr programme is important. The engines have generated good results in our cars in dynamics, fuel savings and noise reduction."

Central to expanding output: the automaker wants to supply GAZ-560 to other producers of vehicles in Russia, possibly AO AvtoVAZ, DOAO Izhmash-Avto, AO Pavlovsky Avtobus (PAZ), AOOT Ulyanovsky Avtomobilny Zavod (UAZ) and OAO Zavod Mikrolitrazhnykh Avtomobiley (ZMA) of AO KamAZ… Another customer could be ZAO Nizhegorod Motors (NM), a venture to be owned 40% by GAZ, 40% by Fiat Auto SpA and 20% by European Bank for Reconstruction and Development (EBRD). NM was to assemble Fiat models on GAZ premises starting fourth-quarter 1998. But the launch, repeatedly delayed, now is slated for mid-2002.

"We are looking to place a long-term order for 40,000 engines from GAZ," UAZ general director Pavel Lezhankin said at the Moscow motor show in August 2000. (This could change. OAO Severstal, Russia's biggest integrated steel producer, bought roughly 20% of UAZ's stock in October 2000 to become the automaker's biggest shareholder. Many plans in Ulyanovsk now are under review.)

GAZ, the Russian carmaker that exported the least under the Soviet Union, also depends on the engines for its ambitions to develop an international profile. This includes a goal to ship 20,000 autos to Latin America in 2001. (Over 1,000 were delivered there this year, but some observers expect the volume to hit only 5,000 next year.)

Similarly, GAZ-560 will be critical to the automaker's initiative to sell vehicles in Western Europe. The automaker recently agreed with SDP to modernise the motor to meet emissions requirements of the European Union (EU), said Rudolf Mandorfer, manager of engine engineering and hardware at Engineering Center Steyr Gmbh (ECS). The centre, a division of SDP, handles GAZ's license for the Austrian group, a subsidiary of Magna International Inc of Canada.

Euro 3 ready by 2002

"We have signed a contract with GAZ to update the motor to comply with Euro 3, the EU's engine regulations in effect until 2004," Mandorfer said. "This will not be difficult or expensive, and we expect to complete the process by 2002. This only entails small changes like fine-tuning combustion. The motor will not need any redesign."

The main engine [also coded GAZ-560 (GAZ-5601 for intercooled versions)] has four cylinders. Made by GAZ since 1998, it runs in the automaker's core models of cars (Volga or GAZ-3110) and light-commercial vehicles (GAZelle and Sobol). It likely would power editions of the new Volga (coded GAZ-3111), scheduled to enter serial production in early 2001.

Recently, GAZ started making a six-cylinder engine (coded GAZ-562), mainly for its medium-commercial vehicle Sadko (coded GAZ-3308) and military vehicles.

In 2001, output of a five-cylinder power plant (coded GAZ-561) could begin, essentially for a family of vehicles based on Ataman platform. Models include a pickup named Ataman-1 [coded GAZ-2308 for open-bed editions, GAZ-230810 for covered-bed editions (dubbed Yermak)] and a sport-utility vehicle (SUV) named Ataman-2 (coded GAZ-3106). Ataman-1, once slated to enter production in November 2000, now may start rolling off the assembly line only in first-quarter 2001. Ataman-2 could be launched in 2003… An Ataman-based concept SUV (coded GAZ-2169, dubbed Combat) debuted at the motor show as a design redux of the automaker's off-roader from the 1950s (GAZ-69), famous as the main military vehicle for countries in the Warsaw Pact during the Cold War. But production prospects for the 2129 are unclear.

GAZ-561 is only in preparation, and its future is undecided, insiders said. (The six-cylinder could be adapted for Ataman models, if the automaker would not make the five-cylinder.)

Small engines for sale

The automaker has disclosed no timetable for introducing smaller powerplants, but they would be built only for other producers. (GAZ's vehicles are too big for engines under four cylinders.)

The three-cylinder, developed by ECS, could fit in compact vehicles like AvtoVAZ's Ladas and NM's Fiats. (In Austria, Steyr reportedly tested a pilot three-cylinder in a Fiat Brava, though not a model that NM is scheduled to build.)… The two-cylinder, conceived by GAZ, could run in ZMA's micro-car Oka plus Mishka, a prototype mini vehicle that could be produced under stewardship of AO Avtoselkhozmash Holding (ASM), an automotive association in Moscow.

GAZ needs money to expand engine production significantly, but it hopes to generate some cash organically, by increasing motor output in measured steps.

"The engine is financially important for GAZ's aspirations to export vehicles and introduce new models," Mandorfer said.

The automaker is trying to improve the cost-efficiency of producing GAZ-560 by localising components and raw material. Nearly 70% of the motor currently is made in Russia. (Crankshafts recently were added.) Generally, imported parts are limited to electronics, gaskets and injectors, Mandorfer said. "GAZ now has possibilities to source injectors locally," he added, noting the automaker ultimately wants to build the engine entirely in Russia.

Plans in question

The motor is crucial to GAZ, but all of the automaker's plans have faced uncertainties, since OAO Sibirsky Alyuminiy (SibAl) became GAZ's biggest shareholder in November 2000.

"The automaker has been losing money, and SibAl will focus on returning GAZ to profitability by cutting costs," said Eugene Satskov, auto analyst at Renaissance Capital, a brokerage in Moscow. "It is difficult to assess the impact of any austerity measures on new projects."

SibAl could provide the financial foundation that GAZ desperately has needed, especially since Russia's economy collapsed in August 1998. The metals group reportedly has pledged to invest $1.5bn-$2bn in the automaker, though major restructuring is expected too. No details are public, but speculation is rampant. In the extreme, some media even have suggested SibAl may axe car output (deemed unprofitable) to focus on commercial vehicles (deemed promising). Plans may become clearer after January 20, when GAZ holds an extraordinary shareholders meeting.

Russian newspapers also have indicated SibAl may want GAZ to make all of its engines - perhaps a clue the Steyr project will accelerate, perhaps a hint the metals group will try to takeover AO Zavolzhsky Motorny Zavod (ZMZ). ZMZ is the main engine supplier to GAZ plus PAZ, the biggest busmaker in the ex-USSR, bought by SibAl in April 2000.

SibAl has been rumoured to be interested in buying ZMZ to forge a mini-empire of auto interests. Indeed, the metals group has created a structure to manage its auto assets named Rusavtoprom. (In the mid-1990s, GAZ already was contemplating an alliance with PAZ and ZMZ.) But the engine producer recently has demonstrated it will fight to stay independent.

GAZ (Gorkovsky Avtomobilny Zavod or Gorky Auto Factory) is based 400km east of Moscow in Nizhny Novgorod, Russia's third-biggest city (known as Gorky 1932-1991). It made 239,711 vehicles in 1999, and it forecast output of roughly 240,000 in 2000. (Production this year through October was 199,988.)

PAZ, located in Pavlovo (a city in the same region as Nizhny Novgorod), makes city buses and inter-city buses. The main model, 7m long, could run on GAZ-562 with modifications, Mandorfer said.

Contact Ryan James Tutak, associate editor of just-auto.com for Eastern Europe:
E rjt@pronet.hu
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