The management of GM-AvtoVAZ has offered to assemble some of AvtoVAZ’s cars, Russian business daily Vedomosti reported on Friday, citing a source close to GM-AvtoVAZ.
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GM-AvtoVAZ is (you’d never guess) a joint venture between AvtoVAZ and General Motors, the Prime-Tass news agency noted.
AvtoVAZ is said to be searching for additional production facilities due to its plans to increase car output, while GM-AvtoVAZ is not operating at full capacity due to low demand for its Chevrolet Viva model, the paper said.
GM-AvtoVAZ has the capacity to produce 100,000 cars annually, but this year it plans to produce only 45,000-46,000 cars, the source said.
GM-AvtoVAZ’ board of directors is scheduled to consider the management’s proposal on 28 August, the source said.
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By GlobalDataAn AvtoVAZ spokesman confirmed that GM-AvtoVAZ had offered the use of its production facilities to the company, the paper said.
However, an unspecified sources familiar with AvtoVAZ’s management, suggested that the proposals would not suit the automaker, the report added. GM-AvtoVAZ has unused capacity amounting to 50,000 cars per year, which is “a drop in the ocean” for AvtoVAZ, the source said. Such capacity could be used to assemble limited edition models, but AvtoVAZ has its own production facilities for this purpose, the source added.
Tatyana Kapustina, an analyst at Russian investment firm Aton Capital, told Prime-Tass the proposal would be beneficial for both AvtoVAZ and GM-AvtoVAZ. It would be better for the former to assemble some of its models at a production facility located closer to it than IzhAvto, which is based in the constituent republic of Udmurtia, Kapustina said. AvtoVAZ negotiated assembling its Lada cars at the facilities of IzhAvto, Vladimir Artyakov, chairman of AvtoVAZ’ board of directors, said in May.
AvtoVAZ, Russia’s largest carmaker, plans to increase its output to over 730,000 cars this year from 721,492 cars in 2005.
GM-AvtoVAZ was founded in 2002 by GM and AvtoVAZ, which both hold 41.5% stakes in the venture, while the European Bank for Reconstruction and Development (EBRD) has a 17% stake. It produces Chevrolet Niva and Viva models. Output fell to 51,810 cars in 2005 from 57,737 cars in 2004.
In early 2006 relations between AvtoVAZ and GM-AvtoVAZ soured, as AvtoVAZ was unsatisfied with the price GM-AvtoVAZ paid for assembly kits it supplied. As a result GM-AvtoVAZ had to halt production for two weeks in February. Later the two companies reached a compromise, Prime-Tass said.
