Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Ailing Moskvich Pleads for City Help

Ailing Moscow car producer Moskvich pleaded with city legislators Monday to help rescue the company, which is being forced by the federal government into bankruptcy for failing to pay its back taxes.

The company's director, Yury Borodin, told the Moscow City Duma that all Moskvich needs is some breathing space to put in place a recovery plan to pull the company out of the red.

"Of course the director is responsible when the plant is not working, but we're not the only plant in Moscow and Russia that has been idle. But it's not the fault of the plant, it's the fault of our government," he said.

Moskvich, which has not made any cars since last February, is one of three companies being forced by the government into bankruptcy proceedings so far for failing to pay back taxes.

The Kremlin has warned that other non-payers will face a similar fate as a part of President Boris Yeltsin's campaign to get tough with corporate tax evaders and plug massive holes in the federal budget.

Borodin said the government's demand for taxes has undermined a restructuring plan for Moskvich. He said more than 1,000 workers have quit the company during the past two weeks "while political games are being played."

Moskvich, which once employed 20,000 people and had the capacity to churn out 160,000 cares a year, owes the federal government 271 billion rubles ($50 million) in back taxes.

Like many Soviet-era industries, Moskvich has suffered from increasing foreign competition and a loss of subsidies and guaranteed orders. The poor quality of its cars also contributed to a plummet in sales to just 40,000 units last year from 67,800 in 1994 to 40,000 cars last year.

Moscow truck maker ZiL is in similar straits and is also under scrutiny by tax officials, but Mayor Yury Luzhkov has pledged the rescue that company from bankruptcy. The city recently acquired a majority stake in ZiL, and Luzhkov has figured prominently in a publicity campaign to promote its products.

So far there has been little sign that the city wants to take on the case of ailing Moskvich as well.

Borodin spoke as though the company was on the verge of recovery until the federal government stepped in with its bankruptcy threat.

"The news of the forthcoming bankruptcy, portrayed as something that already had taken place, seriously damaged our attempts to find a foreign investor," Borodin said. He said the news caused "some mild shock" among potential foreign partners such as Renault of France, which he said was to supply engines under a government loan guarantee for a new Moskvich model.

Though no agreements have been reached, Borodin said the plant has "successfully completed talks" with Toyota on possible joint production of 50,000 minibuses a year under financial guarantee from Japan's Mitsui.

Borodin contended that the plant was "very close" to starting production of yet another variation on its hatchback series, a 2142 sedan, but needed more cash from the state.

"All we need is 76 billion rubles and we can start production in the second quarter of next year," he said.