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. Last Updated: 07/27/2016

AvtoVAZ Still Waits To Close GM Deal

Russia's top automaker, AvtoVAZ, said Tuesday it hoped next month to sign final agreements on a joint venture with U.S. General Motors and the European Bank for Reconstruction and Development.

Alexei Nikolayev, AvtoVAZ's president, said the company also planned to form an alliance of local carmakers to boost Russia's automobile industry, where AvtoVAZ is the clear leader.

GM and the EBRD agreed this year to take part in a $332 million joint venture with AvtoVAZ, where GM and AvtoVAZ would have 41.5 percent each and would contribute $100 million each, while the EBRD would add the remaining $132 million.

"The joint venture is not created yet. The final talks are under way. We hope the final document will be signed in May," Nikolayev told an automobile industry conference.

Observers have called the investment a tremendous vote of confidence in the Russian economy that would likely lead to other foreign investments. The venture marks the biggest, single investment into Russia's automobile industry and is twice as big as Ford Motor Co.'s planned $150 million plant in St. Petersburg.

Under the joint venture, AvtoVAZ is to build about 75,000 of its new Niva off-road vehicles to be sold in Russia under the GM Chevrolet brand name. Production is due to start in 2002.

Nikolayev also confirmed AvtoVAZ's plans to start production of GM's Astra T-3000 model in coming years.

Plans for production of the Astra in Russia were earlier dropped because its target price of about $12,000 was considered too expensive for the local market. GM said in March the Astras would be launched in Russia in 2004-05.

Nikolayev said the local market, where AvtoVAZ had a 76 percent share in production terms and a 55 percent share in sales last year, would mainly demand cars costing $3,000 to $8,000 until at least 2015.

Nikolayev said AvtoVAZ was considering an alliance with Russia's Izhmash and Taganrogsky automobile plants, aiming to increase production of local vehicles.

"Maybe it won't be a holding, but an association of local carmakers," Nikolayev told reporters.

He said Izhmash had already agreed to produce some AvtoVAZ models, the shift of production allowing AvtoVAZ to clear facilities for building new cars.

Russia's automobile industry has been showing signs of consolidation, with industrial and investment group Siberian Aluminum building up stakes in major carmakers.

Siberian Aluminum controls 26 percent of the second-biggest Russian carmaker, GAZ, and aims to form an auto holding company. But Nikolayev said AvtoVAZ had not been invited to join.

He also said AvtoVAZ was not planning to pay dividends for 2000 as the company had to pay off debts accumulated in previous years. AvtoVAZ did not pay dividends in 1999.

AvtoVAZ, which has been outperforming the market since mid-February, was last traded on April 12, closing at $4.35.