Siberian Aluminum Buys Bus Plant

The Siberian Aluminum Group has purchased the Pavlovsky Plant in the Nizhegorod region, which specializes in the manufacture of city buses.

Ruspromavto, the recently created division of Siberian Aluminum, will manage Siberian Aluminums assets in the automobile industry.

Siberian Aluminum did not announce that it intended to move into other areas of business, but rumors that the company was starting to investigate other projects began to circulate after the creation of the giant Russian Aluminum holding.

Russian Aluminum holding was formed when Sibneft director, Roman Abramovich, and Siberian Aluminum director, Oleg Deripaska, agreed to pool their companies aluminum assets to form the Russian Aluminum holding in early April.

The general director of Ruspromavto, Igor Andreyev, said the heads of Siberian Aluminum had been interested in the automobile industry even before the creation of his new division.

Andreyev said Siberian Aluminum bought a controlling block of shares in the Pavlovsky bus plant this spring. MDM-Bank bought 20 percent of the shares and the remainder was acquired on the market. The cost of the shares was not disclosed.

In April, representatives of Siberian Aluminum came to the bus plant and told the management that Siberian Aluminum owned a controlling block of its shares. The plants management has decided to cooperate with Siberian Aluminum.

Siberian Aluminums interest in the auto industry is understandable, as certain car components are made from aluminum.

At the end of last year, the post of vice president went to Viktor Belyayev, now executive director of Russian Aluminum. Belyayev, a longtime KamAZ employee, was KamAZs former first deputy director. KamAZ works closely with the Pavlovsky plant.

Experts on the automobile market are reacting with some surprise to the acquisition. "No one was interested in this factory for a long time," said Yulia Zhdanov, an analyst at United Financial Group.

The plant has been floundering for several years. In the 90s, the bus plant produced 8,000 to 10,000 buses per year.

Andreyev said the investment will amount to "millions of dollars."Despite its large capacity, the financing and production levels at the plant have worsened.

Output was down 11.8 percent with 7,502 buses produced in 1999 compared to the previous year. In the first quarter of this year, the plant produced 1,500 buses, or 66.3 percent of the production for the first quarter of 1999. Net assets for the first quarter of this year were 10.82 million rubles (about $389,000) compared with 19.46 million rubles for the first quarter of last year.

Ruspromavto management said that all of the plants problems stem from inefficient management. Ruspromavto added that demand exists and output will be increased.

In July, the factory released 650 vehicles and by the end of the year full production levels of 900 buses per month will be met, according to management projections.

Siberian Aluminum is now studying the factory rather than making any investments. An investment program must be developed before the end of the month. Andreyev said the investment will amount to "millions of dollars."

Analysts say the main buyers of buses are municipal transport authorities, which cannot guarantee significant, reliable and solvent demand. "There would be more interest in cars or trucks," said Maria Tarulina, an analyst at Troika Dialog.

The Pavlovsky Plant is Siberian Aluminums pilot project as part of Ruspromavto, said Andreyev. Other acquisitions will follow, he said, but he did not release the names of any enterprises under consideration.