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. Last Updated: 07/27/2016

AvtoVAZ, Magna Nix Plant Idea

AvtoVAZ and Canada's Magna have dropped plans to build a plant to manufacture cars for the country's largest carmaker, AvtoVAZ said Wednesday.

AvtoVAZ said in a statement that a preliminary agreement to build a $2 billion plant, signed in May in the presence of President Vladimir Putin and Magna chairman Frank Stronach, had expired.

"It would be economically disadvantageous" to build the plant from scratch, AvtoVAZ spokeswoman Natalya Sidoruk said. Another factor that spoke against the plant was time, she said, declining to provide more details.

On May 18, Stronach and AvtoVAZ chairman Sergei Chemezov inked a memo of intent to build the plant to create a new C-class model.

Under the plan, AvtoVAZ and Magna were expected to invest $1 billion each into the project, but AvtoVAZ has had difficulties securing state financing.

The plan envisioned initial production of 220,000 cars, in sedan, hatchback and estate body trims, later rising to 450,000 units per year. Putin said at the time that the plan had potential and added that he hoped the project would be carried out.

Magna will remain a priority supplier of components for AvtoVAZ and will also consider investing in production of plastic parts for AvtoVAZ, among other projects, AvtoVAZ said.

A Magna International spokesman confirmed that the companies would not build the plant but said they would continue to cooperate.