RUSSIA: GM and Avtovaz "may" announce new engine plant in May

By just-auto.com editorial team | 4 March 2005

General Motors and Russia's largest car manufacturer AvtoVAZ (AVST) may announce in May that they will start building an engine plant in Russia, Vedomosti business daily reported Friday, citing a source close to AvtoVAZ.

The companies planned to announce their new joint project in November 2004, but delayed it until the completion of the "divorce procedure" between GM and Italy's Fiat, the source told Vedomosti.

Unlike the GM-Avtovaz joint venture, in which the companies have equal stakes, AvtoVAZ is expected to hold a controlling stake in the new engine plant, Vedomosti said. The plant is to produce engines mainly for AvtoVAZ, the paper said.

The new joint venture is to take over GM's engine production facilities in Hungary, Vedomosti said, while AvtoVAZ is to transfer the gearbox production facilities of the bankrupt Daewoo Motors India company to the joint venture, another source told the paper.

Officials from AvtoVAZ and GM declined to say when the new plant would be launched, and refused to disclose any details on the project, the paper said.

According to unspecified analysts, AvtoVAZ would have to invest more than $US250 million in its new joint venture with GM, Vedomosti said.

Prime-Tass said AvtoVAZ is the largest passenger car manufacturer in Russia and Eastern Europe. It began operations in 1970 with the manufacture of Fiat-designed models under the Lada name. AvtoVAZ currently controls around 70% of the Russian domestic passenger car production and accounts for 40%-42% of total passenger car sales in terms of volume.

In 2004, AvtoVAZ produced 717,981 cars, up 2.5% on the year. This year AvtoVAZ plans to produce about 684,000 cars.