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. Last Updated: 07/27/2016

Deripaska Widens Auto Empire

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Aluminum tycoon Oleg Deripaska took another step toward building a holding company that will integrate half of the automobile industry of the former Soviet Union.

On Friday, Deripaska signed a cooperation agreement on behalf of Siberian Aluminum with Chelyabinsk Governor Pyotr Sumin, who agreed to hand over the UralAZ carmaker in exchange for Siberian Aluminum's promise to invest 500 million rubles ($14.5 million) and not lay off the plant's workers.

Under the terms of the deal, Siberian Aluminum will buy a controlling stake in ailing UralAZ at a closed investment tender to be held this summer.

With debts of 3.6 billion rubles on its books, UralAZ was put in the state of receivership in September 1998.

"We have been looking for an investor in UralAZ for a long time," Sumin's spokeswoman, Irina Velizhantseva, said in an interview from Chelyabinsk on Friday.

Deripaska first floated the idea of taking over UralAZ at a meeting with Sumin on March 7.

Sumin said Friday that similar agreements will be penned with other potential participants of the tender, at which a 75 percent minus one share stake in UralAZ is to be auctioned off.

"We will monitor the execution of the agreement and revise it if necessary," First Deputy Governor Viktor Timashov said at a press conference in Chelyabinsk, news agencies reported.

Chelyabinsk officials are mainly concerned with the possibility that Deripaska will order payroll cuts during the restructuring process.

To make sure the Russian Aluminum and Siberian Aluminum boss does not deviate from the designated path, Chelyabinsk officials told Siberian Aluminum that it needs to sign an agreement with the municipal government of Miass, where UralAZ is located.

UralAZ employs some 20,000 workers, whose average salary amounts to $100 a month.

Plant officials refused to comment.

Earlier, news reports said external manager Valery Panov was trying to prevent a takeover by outsiders and was trying to set up a scheme to save his job.

Deripaska was quoted as saying Friday that, except for strengthening its engineering team, there was no need to make any drastic changes at the plant.

UralAZ is a truck producer with an annual capacity of 30,000 units.

It plans to roll out 10,000 trucks in 2001, up 17.6 percent from 2000 and up 83 percent from 1999.

UralAZ should become part of Siberian Aluminum's Rosavtopromholding, an umbrella company for Siberian Aluminum's acquisitions in the automobile industry.

The holding should include a blocking stake in Russia's second-largest automaker, GAZ, and some GAZ suppliers, the Pavlovsky and Likino bus plants, Zavolsky engine plant, Yaroslavl engine plant, Arzamas machinery works and the Minsk automobile plant.

On Friday, Deripaska told reporters in Chelyabinsk that he is going to merge the Minsk plant and UralAZ into a single company.

According to unofficial sources, Deripaska promised the federal government that he would plow as much as $2.5 billion into Russia's automobile industry when he asked for state support in taking over UralAZ and the Minsk plant.

Over the last month and a half, Siberian Aluminum has spent $170 million to replenish the working capital of GAZ in Nizhny Novgorod.