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. Last Updated: 07/27/2016

GM Wary but Plans For Russia on Track




General Motors, the world's No. 1 carmaker, is cautiously proceeding with plans for a venture with Russia's largest car firm, AvtoVAZ, the head of the U.S. auto giant's Russian operations said.


A target for a deal between August and autumn should be met, David Herman said in an interview Thursday. GM signed an initial memorandum of intent with AvtoVAZ in March.


"We tried to set a time limit and get it [the agreement] done by the fall and I am quite optimistic we can do that," he said. "We still hope ? that if it is not August it will be September."


The car market in Russia, with a population of almost 150 million, was seen as one of the best prospects for Western car companies after the collapse of the former Soviet Union.


But getting joint ventures off the ground has been slow, with only a handful of real commitments actually made.


Plans also had to be reconsidered after the August 1998 crisis reminded everyone how volatile a place Russia can be and created worse conditions for car sales.


Herman said a final agreement with AvtoVAZ would include in concrete detail the timetable for investment, how much would be involved and what vehicles would be made.


Reports at the time of the signing of the March protocol said the investment would be worth $200 million and the joint venture would produce models based on the Opel Astra T-3000 car.


But Herman declined to give figures or name which models would be made by the venture, to be based at the VAZ plant at Togliatti, near Samara, some 1,000 kilometers southeast of Moscow.


"We are trying to create a program to produce cars and not just win us a small percentage or a marginal percentage of the Russian market but really to be part of the market," he added.


He said that an affordable price rather than considerations of design or technical supremacy would be the dominant factor in Russian buyers' minds for several years to come.


Herman said he saw no sustained improvement in the car market in Russia until 2002.


"Acquisition power is the name of the game for at least five years here. That is why the price of the vehicles we produce really has to be down at the lowest possible level," he added.


He said new Russian cars could cost as little as $5,000.


However, he added: "It will be unlikely that any Western-engineered car or substantially Western-engineered car will come in at any less than $8,000. ? You have to get to $10,000 or lower."