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. Last Updated: 07/27/2016

State Agency Details Rescue Plan for Lada

VedomostiBoris Alyoshin
The government has drawn up a $5 billion rescue plan for AvtoVAZ as it prepares to take a greater role in running the ailing maker of Lada cars.

The Federal Industry Agency has come up with a master plan, which was leaked to Vedomosti, to help Russia's largest carmaker ward off increasing competition from foreign brands. The plan, detailed in Monday's issue of the paper, proposes pouring money into everything from new models to alternative-fuel engines and dual-use technologies that could be used in other industries.

The news comes ahead of an extraordinary shareholders meeting on Thursday, when a new board of directors will be elected. Following the resignation of long-serving board chairman Vladimir Kadannikov in October, the state is widely expected to cement its grip over AvtoVAZ by forwarding new directors from state arms dealer Rosoboronexport, state-run Vneshtorgbank and the Federal Industry Agency, which is headed by Boris Alyoshin.

"The plan will probably be considered at the board of directors," Natalya Sidoruk, a spokeswoman for Alyoshin, said, adding that it was likely to undergo modifications.

Alexander Gromkov, a spokesman for AvtoVAZ, declined to comment.

Alyoshin's blueprint outlines the development of new models, such as mini-vans and SUV crossovers, that could cost up to $3 billion. A separate project to start manufacturing a new line of engines could require up to $1.8 billion. As AvtoVAZ would not be able to commit more than $25 million per year, some of the funding would have to come from the state, Vedomosti cited Alyoshin as saying. The carmaker could also raise money through issuing stocks and bonds, he said, but would first need to simplify its highly tangled ownership structure.

Yelena Sakhnova, an automotive analyst with brokerage UFG, doubted that Alyoshin's plan -- if approved -- could help AvtoVAZ overcome its foreign competition. "To realize that plan, we'd need breakthrough technologies, and where would we get them?" she said.

Earlier this month, Andrei Klepach, head of forecasting at the Economic Development and Trade Ministry, said that domestic carmakers might be eligible to tap into a new $2.5 billion state investment fund.

Domestic carmakers have seen sales plummet 14 percent in the first half of the year, according to PricewaterhouseCoopers.