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. Last Updated: 07/27/2016

Caterpillar Deal to Get LIAZ Rolling

Russia's largest bus maker, LIAZ, will resume production this month after a six-month stoppage, thanks to a major deal with the St. Petersburg city government and the U.S. firm Caterpillar, LIAZ officials said Monday.

LIAZ plans to produce 500 buses equipped with Caterpillar engines to run in St. Petersburg this year. It made its first payment this month in an $8 million deal signed with the U.S. company last November. The contract is guaranteed by the St. Petersburg city administration and Tveruniversalbank, Russia's 20th-largest bank.

"This contract means a lot for us," LIAZ deputy director Alexander Lobkaryov said in a telephone interview. "Our plant will be able to at least resume work."

LIAZ, located in the town of Likino-Dulevo 90 kilometers east of Moscow, is capable of producing 5,000 city buses annually. The company produced 2,000 vehicles in 1994, but last year production fell to 500 units, and 6,000 workers were idled for half a year.

The company sees the deal with its U.S. partner as an opportunity to significantly increase production. "We hope we will be able sell more after our potential customers see the new buses in St. Petersburg," Lobkaryov said.

An average price of $85,000 makes LIAZ buses an expensive purchase for city administrations, the main clients of the bus manufacturer.

"They stopped buying from us because a Russian-made engine we previously installed was quite noisy and dirty," Lobkaryov said. "We believe we will be able to sell much better now. We plan on making 2,000 buses this year, although at the moment we have only this order from St. Petersburg."

Caterpillar won a tender for the deal, competing against major European producers, said Darrel Elijah, head of Caterpillar power systems department in Moscow. Elijah called the contract a "very significant deal in terms of volume."

All 500 engines will be supplied to LIAZ before June, he said. Caterpillar, which is primarily known for making earth-moving equipment, has been selling on the Russian market for more than 50 years and is negotiating several other engine deals similar to the one with LIAZ, he said.

Buses with the Caterpillar engines were used last summer in the city of Ulyanovsk as an experiment and were welcomed by local drivers, Lobkaryov said. "The engines satisfy the highest European standards," he said.