Production at US-Russian vehicle manufacturing joint venture GM-AvtoVAZ ground to a halt on February 9 after co-founder AvtoVAZ stopped supplying assembly kits and engines, Russia’s business daily Vedomosti reported on Friday, citing sources within both firms.
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GM-AvtoVAZ’ lost profit since production stopped amounts to US$8 million, Kirill Chuiko from UralSib financial corporation estimated, Vedomosti reported.
General Motors and AvtoVAZ each hold a 41.5% stake in GM-AvtoVAZ, while the European Bank for Reconstruction and development has a 17% share.
Vedomosti said GM-AvtoVAZ was a favourite project of former AvtoVAZ chairman of Vladimir Kadannikov, who planned to launch a new model under the joint venture and develop its own car model before his resignation in October 2005.
AvtoVAZ general director and president Igor Yesipovsky reportedly is dissatisfied with GM-AvtoVAZ, saying that AvtoVAZ supplies assembly kits to the joint venture at 15% below production cost, Vedomosti said, citing a source close to AvtoVAZ. With GM-AvtoVAZ’ annual output at 50,000 cars, AvtoVAZ loses $20 million annually, the same source said.
According to the paper, AvtoVAZ wanted to increase the price of assembly kits for GM-AvtoVAZ, but GM-AvtoVAZ refused to change the contract. This will be discussed at an extraordinary board of directors meeting scheduled for Saturday, February 18, Vedomosti said.
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By GlobalDataAnalysts told the paper AvtoVAZ may force GM to sell its stake in GM-AvtoVAZ.
GM-AvtoVAZ’ sales decreased 4% on the year to 51,806 cars in 2005, the company said in January. Output fell to 51,810 cars in 2005 from 57,737 cars in 2004.
In 2005 GM-AvtoVAZ sold 2,000 Chevrolet Viva cars, which it started making that year.
In 2004, GM-AvtoVAZ net profit was 4.57 billion rubles and revenue was 160.5 billion rubles, Vedomosti said.
