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.
Analysts 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.
