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. Last Updated: 07/27/2016

AvtoVAZ, GM to Decide on Venture

MOSCOW -- Russia's largest automaker AvtoVAZ and U.S. carmaker General Motors Corp. expect to decide in May or June whether to join forces to produce a special Opel vehicle at a plant in northwest Russia, company officials said.

A spokesman for General Motors Europe in Zurich told Reuters by telephone that GM is conducting a feasibility study for the project together with AvtoVAZ and Finland's Valmet OY.

"We will wait for the outcome of the study, which will be finalized in June, to make a decision on whether to proceed," he said.

AvtoVAZ's chief executive Alexei Nikolayev said working groups had been set up with General Motors Opel division to develop a plan for cooperation by May.

"We have not discussed what kind of investment Opel would put up, or its share in management. But it will most likely be a joint venture," he said in a statement.

He said they were considering building a plant in Vyborg, near the Finnish border in Russia's Karelia region, to produce a special Opel model adapted to the Russian market.

The GM spokesman said they were studying the feasibility of constructing a new plant or upgrading an existing factory in northwest Russia.

Both companies have said the proposed factory would produce 30,000 to 50,000 Opel cars annually.

AvtoVAZ agreed to a government plan to issue shares this spring to raise capital after the government threatened to institute bankruptcy proceedings.

However, the agreement did not envision the shares being sold to a strategic investor who could take control of the company. At the time, General Motors Opel division was mentioned as a possible "strategic partner."

"We do not intend to acquire a financial stake in AvtoVAZ at this time," the GM spokesman said. GM would take AvtoVAZ's financial difficulties into account when deciding whether to move ahead with the proposed plant in northwest Russia.