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over the Russian car industry it cand hardly have imagined having to
shoulder responsibility for saving Russia's largest carmaker. But
Renault has found itself in a quandary after its one billion dollar
investment in 2008 to buy 25 percent in the troubled carmaker has
so far led to nothing but trouble. The outlook grew grimmer when Prime
Minister Vladimir Putin warned Renault last week its stake in
Avtovaz could be diluted unless it provided help for the company,
which has already announced plans to cut a quarter of its workforce.
The government is concerned that mass layoffs at Avtovaz, the key
employer in Tolyatti, a city of 700 ,000 people on the Volga River,
could spill into social unrest. "We need to deflate this huge bubble
that can burst" at any moment, a government official told AFP,
speaking on condition of anonymity. Putin bluntly said on Monday that
the state would not allow the carmaker to fail. On Monday, Putin met
with Christian Esteve, head of the Eurasia region for Renault, to
discuss ways the French carmaker could help. But the Renault
executive declined to commit to any concrete moves, except for saying
it felt "socially responsible." Analysts say Renault is stuck and
needs to decide fast whether it could afford to have a stake in the
troubled carmaker. "The government is trying to squeeze the maximum"
out of Renault, said Vladimir Bespalov, an auto analyst at VTB
Capital. " Difficult negotiations are going on" between Renault and
the government, he added. "Nobody expected that the (Russian auto)
market would collapse so much," he added. On Tuesday, Putin's powerful
first deputy, Igor Shuvalov, announced that Renault was ready to
invest in the ailing auto giant, a move that Renault refused to
confirm. "The most important thing is that Renault has confirmed
strategic interest in the development of Avtovaz, including
transferring the most advanced technologies, " Shuvalov told
reporters. Olga Sergeyeva, a Moscow-based spokeswoman for Renault,
said however that the transfer of technologies was just one of the
options. "As of today, the decision has not yet been taken," she
said. Shuvalov said the amount to be invested in Avtovaz by the state
and Renault would be determined in the coming weeks. The catch
however is that Avtovaz has not yet come up with a precise business
plan. German Gref, head of Russia's largest savings bank Sberbank and
the Russian carmaker's largest creditor, said Tuesday Avtovaz still
did not have a precise idea of how much money it needs. "So far we
don't have a figure we've agreed upon," he told reporters. The state
earlier this year provided 25 billion rubles (0.83 billion dollars,
0.57 billion euros) to Avtovaz. A report in Kommersant newspaper,
citing the Russian carmaker's presentation to the government, said
Tuesday that Avtovaz needed at least 70 billion rubles to cover its
debt among other things. Avtovaz spokesman Alexander Shmygov said he
could not confirm the report. Russia had promised to become Europe's
fastest growing market. Since the onset of the crisis a year ago the
car market there has been hit by a plunge in demand as Russian
consumers tighten their belts causing foreign and domestic companies
to slash their production plans. Renault has sold Avtovaz
technologies, including engines and a license to produce Logan MCV,
estimated at 220 million euros, but analysts say Avtovaz needs more
modern know-how.
