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. Last Updated: 07/27/2016

State Car Champ in the Works

bloombergAvtoVAZ could become the backbone of a sprawling state automotive giant.
The country's largest carmaker, AvtoVAZ, could form the cornerstone of a new, sprawling state automotive conglomerate currently being worked on by government ministries, according to a preliminary proposal signed last month by President Vladimir Putin.

Drawn up by Federal Industry Agency head Boris Alyoshin, who sits on the board of AvtoVAZ, the proposal calls for the formation of a single corporation comprising car, truck and bus production, according to a copy of the proposal obtained by The Moscow Times.

The document also says the state should consider a $5 billion rescue plan for the automotive industry to help fight off foreign competition, confirming a figure cited in a media report in December.

The Industry and Energy Ministry said Friday that it, along with the Finance Ministry and the Economic Development and Trade Ministry, was fine-tuning Alyoshin's plan. It added that their review was to be returned to Putin by Feb. 20. The Federal Industry Agency is part of the Industry and Energy Ministry.

The government document comes to light as speculation mounts over growing state interest in a number of companies, with state arms dealer Rosoboronexport emerging as a possible vehicle for government-led acquisitions.

On Dec. 22, just two days after the word "soglasen," or agreed, was written, apparently by Putin, on Alyoshin's plan, two officials from Rosoboronexport were given senior posts on the board of AvtoVAZ.

This past week, Rosoboronexport confirmed it was interested in the country's largest truckmaker, KamAZ. Recent reports have also said the arms dealer was looking at metals giant VSMPO-Avisma.

"Essentially, only one Russian company -- AvtoVAZ, probably teaming up with other domestic makers -- can potentially compete with large foreign concerns," Alyoshin wrote in an accompanying letter. Russia's car market could be worth as much as $30 billion by 2010, he said. AvtoVAZ was unavailable for comment Friday.

Cited in a Vedomosti report on Friday, Alyoshin said the automotive holding could include AvtoVAZ, KamAZ and GAZ, part of billionaire Oleg Deripaska's empire.

AvtoVAZ, KamAZ and GAZ "occupy different niches and mutually complement each other," the paper quoted Alyoshin as saying.

Alyoshin was unavailable for comment Friday. Federal Industry Agency spokeswoman Natalya Sidoruk downplayed the plan but confirmed that the idea of a mammoth automotive holding was making the rounds.

Brokerage UFG expressed skepticism about the plan. "Alyoshin has a reputation for suggesting consolidation programs, including a proposal to establish the United Aircraft Construction Co. back in 2001 that has still not been implemented," it said.

Another possible member of the giant automotive club could be UAZ, said an unnamed source at AvtoVAZ cited in Friday's Vedomosti report.

Severstal-Avto, which controls UAZ, declined to comment.

Pavel Yerasov, a spokesman for Russkiye Mashiny, or Russian Machines, the part of Deripaska's empire that controls GAZ, said nobody had discussed such plans with his company.

Industry and Energy Ministry spokesman Pavel Kuznetsov declined to comment on the necessity of the conglomerate and said it was still unclear what exactly the presidential stamp of approval meant.

"It remains a big philosophical question what the president agreed to," said Kuznetsov.