Government Pledges to Support GAZ

A government commission chaired by Deputy Prime Minister Igor Shuvalov singled out Oleg Deripaska's GAZ Group for special treatment in a session on Tuesday.

The commission, tasked with increasing the stability of the country’s economy, identified the company as deserving of government support and ordered the Economic Development Ministry to lay out a plan to aid the troubled automaker.

Among measures being considered are state guarantees, which would enable GAZ to get loans at lower interest rates, a representative of Shuvalov's office said Tuesday.

The company has not published its financial results for last year, but last September its debt was about $1.3 billion, most of which comes from short-term loans that are coming due in the middle of 2009, said Mikhail Pak, an analyst with Metropol.

The government might also be considering purchasing part of a proposed 20 billion ruble share issue through one of the state-owned banks, Pak said.

Calls placed to GAZ’s press service on Tuesday went unanswered.

In December, the commission identified Russian Machines, majority owner of GAZ Group and part of Oleg Deripaska's Basic Element holding company, as one of 295 companies critical to the Russian economy and eligible for priority access to state guarantees and loans.

A working group set up to monitor the strategic companies identified GAZ's modernization and restructuring program as one of the most promising among the companies reviewed, a news release on the government's web site said.

Although GAZ is a privately owned company, it is involved in key sectors of the market, such as buses and light commercial vehicles, which make it a promising target for state support, Pak said.

GAZ has been one of the auto industry’s hardest-hit victims, suffering from plummeting demand brought on by the worldwide financial turmoil.

Production fell in 2008, with output only reaching 72,000 vehicles, down 25 percent from a year before, Pak said.

The company has been late on payments to metal producers Novolipetsk Steel and Magnitogorsk Iron & Steel Works last November and was forced to lay off 1,200 people from its plant in Nizhny Novgorod earlier this month, with the remaining employees getting a four-day work week and reduced salary.

Also on Tuesday, Economic Development Minister Elvira Nabiullina ordered the creation of another committee tasked with monitoring the financial and economic state of the firms on the strategic companies list.

The new committee will include Deputy Finance Minister Alexander Novak, as well as officials from the Transportation Ministry, the Energy Ministry, Gazprombank, Sberbank, Vneshekonombank and others.

Tuesday’s session was attended by VEB chairman Vladimir Dmitriyev, Sberbank chairman German Gref, Economic Development Minister Elvira Nabiullina, Deputy Prime Minister Alexander Zhukov, presidential administration head Sergei Sobyanin and Russian Machines CEO Valery Lukin.


Staff writer Nadia Popova contributed to this report.