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. Last Updated: 07/27/2016

AvtoVAZ Chief Woos Creditors or Investors

The nation's biggest carmaker, Lada manufacturer AvtoVAZ, needs hundreds of millions of dollars in cash and investors or creditors to help it develop its next range of cars, according to the head of the company.

AvtoVAZ chairman Vladimir Kadannikov said in an interview that the company also wanted to raise its share price and capitalization, after an 18-fold rise in the last two years, as a base on which to attract funds.

He also backed paying dividends on 2001 earnings, for the first time in five years, and saw sales rising this year to 95 billion rubles ($3 billion) from 92 billion in 2001.

"Our partner could be anyone, a foreign firm or a local firm," said Kadannikov, 60, who has spent 44 years in the car industry of the Soviet Union and Russia.

AvtoVAZ, whose cars are ubiquitous in Russia and the former Soviet Union, from the boxy Zhiguli -- known simply as a Lada by most in the West -- to the rugged but basic Niva offroad vehicle, is already working with General Motors.

The two are to build an offroad variant called the Chevy Niva and both have indicated cooperation could become closer.

"If all goes normally with our project with GM we have said that we would try to extend this project or strategic partnership," Kadannikov said.

At the moment, AvtoVAZ is not holding talks with potential investors, although he said the European Bank for Reconstruction and Development had visited its huge plant in central Russia with a view possibly to lending funds.

The sort of money the company needs is not massive by global standards, but difficult to find for a company which supplies its cars to a market where the average salary is $150 a month and the overall average price of a new car would be around $3,500, compared with some $10,000 in Western Europe.

But the company dominates the Russian market, selling some 70 percent of the 1 million new cars sold last year.

Kadannikov said the company's project to develop its new range of Kalina cars, on which it would start working this year, would involve around $800 million.

"We think we can spend around $450 million of our money on the Kalina, but the rest we will need to bring in, either by credits or by direct investments in exchange for some kind of property," he said.

Some of the funds would come from the company's own profits, which he said would be roughly 6 billion rubles ($200 million) for last year on turnover of 91.8 billion rubles.

He expected turnover to rise this year to 95 billion rubles, but would not give a forecast for net profit.

He said attracting investors would be helped by the fact that the government recently released around 50 percent of the company's shares, which had been frozen as a deposit for tax debts to the state.

The fact that the price of the company's stock had increased from around one dollar at the start of 2000 to stand at $18.40 now, would also help if it came to having to raise funds by selling shares to a potential investor.

Kadannikov said he thought the company's stock was still undervalued and thought it was worth more like $45 to $50 a share.

He said the company would try and get the price higher by being an active stock market player and by trying to pay dividends. He would not give a figure for a possible dividend payment this year, but said he was in favor of one, which would be the first since 1995