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. Last Updated: 07/27/2016

AvtoVAZ Rattles at GM Venture

bloombergThe case against the Chevy Niva's maker may be a sign of lawsuits to come.
AvtoVAZ has filed a suit against its joint venture with General Motors in what appears to be a test case floated by the new, state-friendly management of Russia's largest carmaker.

AvtoVAZ is suing GM-AvtoVAZ for a symbolic 1,680 rubles ($60), the Samara region arbitration court said Wednesday. A preliminary hearing was held on Tuesday and the court will meet again in January, Nina Bibikova, one of the judges hearing the case, said by telephone. She said she was not familiar with the nature of the suit.

Although the sum sought by AvtoVAZ is trifling, it could herald a slew of suits for significantly higher sums if the carmaker wins. After a number of representatives of state-owned companies were elected to the AvtoVAZ board last week, new general director Igor Yesipovsky said that the company would review its joint venture with GM, which makes the Chevy Niva and Viva models.

The auto giant is suing for damages sustained after the venture stopped an assembly line in a dispute over the quality of car parts delivered by AvtoVAZ, Vedomosti reported on Tuesday.

"This is just the beginning; it's a precedent," said a source in AvtoVAZ's management who requested anonymity because of the ongoing suit.

If AvtoVAZ comes out on top, it will hit the joint venture with multimillion-ruble suits and possibly take GM itself to court, Vedomosti said, citing an unnamed source.

AvtoVAZ and the joint venture both declined to comment on the report, but the source in AvtoVAZ's management told The Moscow Times that the company was intent on freeing itself from restrictive agreements with the joint venture.

Asked whether AvtoVAZ will continue cooperating with GM, the source said: "Why not -- if they heed our requests."

"The new AvtoVAZ leadership has given the order to review all agreements with our suppliers and partners, including those from abroad," the source added.

GM-AvtoVAZ is a partnership between GM and AvtoVAZ, which each hold a 41.5 percent stake, and the European Bank for Reconstruction and Development, which owns the remaining 17 percent.

Kirill Chuiko, an automotive analyst with brokerage UralSib, said AvtoVAZ was most likely losing money because it supplied the venture with car parts at a below-market price.

But Vladislav Tsvetkov, an analyst with the Russian Marketing Association, suggested the suit was directly linked to changes at the top of AvtoVAZ. "It's rather likely that cooperation with GM doesn't fit the strategic course of AvtoVAZ's new management," he said.

Last week, the state cemented its grip over AvtoVAZ by delegating officials from state companies to the board of directors, effectively making the state arms dealer, Rosoboronexport, the carmaker's manager.

Staff Writer Lyuba Pronina contributed to this report.