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. Last Updated: 07/27/2016

AvtoVAZ Will Assemble Nissan Cars

ReutersAn AvtoVAZ employee working on the factory’s assembly line Friday. The company said it might cut 27,600 jobs.

AvtoVAZ plans to assemble Nissan’s class B cars at its production facilities by 2012, officials and sources at AvtoVAZ and local administration said Friday.

Such a deal could be a boon for AvtoVAZ, which a day earlier said it might extend planned job cuts to 27,600 positions, including the elimination of 5,000 jobs announced earlier this month.

The company said it was slashing a quarter of its workers because the economic crisis has halved car sales in Russia.

“Our intention is to assemble one of the B class models offered by the [Renault-Nissan] alliance in 2012,” acting vice president Vitaly Vilchik said.

Nissan has offered to organize the assembly of its cars at the AvtoVAZ factory in the Samara region, a source at the Russian company and a local official said. “At Nissan they understand that the St. Petersburg facility is not sufficient, they are counting on a recovery of the market,” the company source said.

Nissan is an alliance partner of Renault, which holds a 25 percent stake in AvtoVAZ. The three companies are currently eyeing a possible joint venture to make car parts in Russia.

For its part, AvtoVAZ will halve capital expenditure plans for the next three years, even though it hopes for state help with its development plans, Vilchik said. “We want to receive state guarantees for loans, which are essential for investment in new projects,” he said. “This number [capex for 2010-2012] has been reduced considerably, almost halved, and now it is about 42 billion rubles ($1.40 billion).”

The company will also stop producing the so-called “classic” models of the Lada car, boxy sedans whose design has barely changed since the early 1970s, by 2012, he added.

Meanwhile, Russian car executives pulled out of a conference at the Frankfurt Motor Show on Friday to join government officials for talks on the auto market.

Among the executives that pulled out were KamAZ chief executive Sergei Kogogin, former AvtoVAZ CEO Boris Alyoshin and Russian Technologies CEO Sergei Chemezov, said Klaus Mangold, the German BDI industry federation’s chief lobbyist for eastern Europe.

Russia faces a “very, very difficult outlook,” Volkswagen sales chief Detlef Wittig said at the conference.

Car sales in Russia, Europe’s second biggest market in 2008, tumbled 51 percent in the first eight months of the year. The Association of European Businesses this month cut its forecast for 2009 Russian sales to 1.4 million new cars and light commercial vehicles.

Russia’s labor costs and centralized industrial structures deter German suppliers from setting foot in the country, Wittig said. The government must not seek to “concentrate” carmakers’ operations and suppliers as a means to shield them against the market slump, he said.

Last month, the government announced plans to create a holding company that will combine state-owned stakes in two of the country’s biggest carmakers to help the struggling industry during the economic downturn.

“Centralization is the opposite of modern entrepreneurial thinking,” Wittig said. 

(Reuters, Bloomberg)