AvtoVAZ has projected a 37% drop in its output this year to 590,000 cars and assembly kits.

Business daily Vedomosti reported that AvtoVAZ announced the new forecast at a meeting with suppliers this week.

AvtoVAZ plans to produce about 450,000 cars for the domestic market, 80,000 cars for exports, and 60,000 assembly kits, the report said.

AvtoVAZ produced about 940,000 cars and assembly kits in 2008.

Russian media also reported that AvtoVAZ will give up its current payment scheme and pay suppliers in cash in 2009 to prevent production disruptions.

AvtoVAZ briefly shut down its assembly line twice in early February over shortages of parts. The supply problems emerged after the company introduced a new payment scheme, under which 30% of components supplied were paid for in cash, and AvtoVAZ used promissory notes from its own and affiliated banks to pay the remaining 70%.

“The company plans to pay off the money owed for supplies provided in the first three months of 2009,” the manufacturer said in a news release after company President Boris Aleshin’s meeting with suppliers.

“AvtoVAZ will stick to cash payments in 2009 due to changes in its production plan and difficulties facing suppliers.”

However, the manufacturer said it would still pay its 2008 supply debts partly by promissory notes, reports said.

Russia’s car market in February was 38% down on last year as the recession hit demand.