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. Last Updated: 07/27/2016

GAZ Snaps Up British Van Maker

Itar-TassGAZ's Zolotaryov, left, and Eberhardson speaking to reporters on Monday.
Oleg Deripaska's GAZ announced Monday that it had struck a deal to buy British van maker LDV from U.S. private equity investor Sun Capital and said it would expand production to 20,000 vans per year by 2008.

GAZ, Russia's second-biggest automaker, said it would produce some of LDV's Maxus vans at its Nizhny Novgorod factory.

No figure was put on the sale. GAZ executives insisted that no jobs would be lost at LDV's Birmingham factory.

"With this product, we are moving into the future as a global player," Erik Eberhardson, head of the GAZ Group, said at a Moscow news conference Monday.

Former Ford Europe president Martin Leach and former A.T. Kearney executive Steve Young were appointed to run LDV, GAZ said in a statement.

GAZ board chairman Pyotr Zolotaryov told reporters that a left-hand drive Maxus would be made in Nizhny Novgorod and aimed primarily at the Russian and CIS market. Maxus vans made for the British market are right-hand drive vehicles.

Before production starts in Russia, a small number of vans will be imported here, Zolotaryov said.

The Maxus, which will retail at a starting price of $20,000 in Russia, is a class apart from GAZ's Soviet-era GAZel vans.

Alexander Zhukov, an automotive analyst at Metropol brokerage, praised the deal and said that LDV's engineering expertise and new technologies would help GAZ update its GAZel vans.

GAZ is currently the seventh-largest manufacturer of commercial vehicles worldwide.

Part of the deal is access to international markets and "engineering competence," Zolotaryov said.

He added that GAZ hoped to boost its export sales with the Maxus model.

GAZ hopes to boost its export sales from 19 percent in 2005 to 25 percent this year, Zolotaryov said.

Maxus vans are sold through more than 90 dealerships in Britain, where it was the third best-selling light commercial vehicle last year.

LDV aims to make 10,000 vehicles this year, with an expected turnover for 2006 of ?140 million ($260 million).

The carmaker currently exports vans from Britain to Malaysia and Turkey.

The Birmingham factory also makes panels for Land Rovers, among other products for automobiles, Eberhardson said.

Zolotaryov said LDV would continue buying engines for the Maxus from Italian manufacturer VM Motori, a company that has been linked to a possible buyout by GAZ.

Zolotaryov declined to comment on whether GAZ would buy VM Motori.

Both companies declined to put a figure on the sale Monday, but Zolotaryov said GAZ would disclose the price it paid in financial documents at a later stage.

Kommersant said Monday that the deal was not worth more than $100 million and that LDV had debts of more than $400 million, without saying where it got the information.

A spokesman for GAZ, Vladimir Torin, on Monday denied that report.

Zolotaryov said Monday that LDV was virtually debt-free.

"We've bought an absolutely clean company," Zolotaryov said.

He said GAZ had bought out LDV's debt, but said it was so negligible that it probably would not figure in financial reports.

The Financial Times reported that Sun Capital and another buyout firm, European Acquisition Capital, paid about ?75 million ($140 million) for LDV.

Philip Dougall, managing director of Sun Europe Partners, an affiliate of Sun Capital, said in a statement Monday that when LDV was acquired in December 2005, "the business was only days away from becoming another high-profile collapse for the long-suffering U.K. automotive industry."

Zolotaryov said Monday that GAZ could possibly sell Maxus vans made in Russia to the Health and Social Development Ministry for use as ambulances.

By acquiring the Maxus brand, GAZ was saving the $250 million to $300 million it would take to develop a new model, Zolotaryov said.

The labor union that represents LDV employees in Birmingham, the Transport and General Workers' Union, welcomed GAZ's investment as "an opportunity to keep the operation in Britain."

"GAZ is an experienced carmaker. This is not a company that's looking to get out quickly," said Andrew Dodgeson, a union spokesman, adding that the arrival of Leach, the former Ford executive, was good news for the factory.