AvtoVAZ Debt Halts Delivery of Parts

Auto parts companies in the Saratov region said Wednesday that they are in critical condition, and some have ceased delivering components because they have not received payment from AvtoVAZ for several months, forcing the auto giant to make unfinished cars.

AvtoVAZ, Russia's biggest carmaker, will complete the automobiles once the plant receives the necessary parts, Interfax reported Wednesday.

The firm is especially short on rubber components from Balakovorezinotekhnika, a company based in the Saratov region, a source at AvtoVAZ told Interfax. The company has stopped shipments until AvtoVAZ pays a 500 million ruble ($14 million) bill for the components, the source said.

The auto giant's total debt to parts makers in the Saratov region is about 1 billion rubles, a spokesman at the regional industry and energy ministry said on condition of anonymity.

The supplier in Balakovo is in an especially difficult situation and will be forced to lay off 3,400 people, about one-third of its workforce, in the first half of the year if payments do not resume, she said, adding that the regional government is preparing to address automakers with outstanding debt on behalf of Saratov part makers.

There are 16 auto component makers in the Saratov region, employing 30,000 people, and the industry is worth about 9 billion rubles annually.

Nobody at Balakovorezinotekhnika was able to comment Wednesday.

AvtoVAZ has started paying component makers only 30 percent of the bill in cash, covering the rest of the invoice in promissory notes.

The company owes about 150 million rubles to European Bearings Corporation in invoices from last year, said Oleg Savchenko, founder of the parts maker.

"[European Bearings Corporation] cannot pay for the salaries and raw materials in promissory notes," said Savchenko, who does not hold an active management position in the company because of his position as a State Duma deputy.

Savchenko said production had been at a halt for two months, workers have been receiving only two-thirds of their salary at the Saratov and Volgograd plants and the company now makes its deliveries only from what it has stocked.

"The situation is critical," he said, predicting that the plants may only hold a few weeks before money runs out completely.

Nobody at AvtoVAZ was available for comment Wednesday evening.