The state will help

AvtoVAZ found $4.5 billion in the Russian Development Bank

The new management of AvtoVAZ, consisting mainly of people from the state-owned Rosoboronexport, seems to have appreciated its ambitions for the development of the plant and intends to implement them with money from the state-owned Russian Development Bank. Last Friday, AvtoVAZ President and General Director Igor Esipovsky and Chairman of the Board of the RBR Yuri Isaev signed an agreement of intent between the plant and the bank. As stated in the company's statement, AvtoVAZ is interested in attracting financing totaling up to $4.5 billion in order to update the model range of Lada cars and power units for them.

A source close to the management of AvtoVAZ explained to Vremya Novostey that the announced figure of $4.5 billion is “preliminary.” According to him, the company is considering two options for financing its projects - attracting government funds and using loans from financial organizations. The final amount and structure of financing will be determined after the preparation of a feasibility study for the construction of a new plant in Tolyatti on the basis of AvtoVAZ.

As previously reported, after the arrival of new management at AvtoVAZ, a strategy for the development of the enterprise until 2020 was developed. The main point in its implementation is supposed to be the construction of a new plant with a capacity of 450 thousand cars per year (currently the capacity is designed to produce up to 750 thousand cars per year). The new plant is expected to be built in three years. They intend to release models on it on new, more modern platforms. At first it was said that VAZ would independently develop new types of platforms and develop 12 new models based on them. However, then the company’s management began to be inclined to buy out licenses for ready-made platforms from leading foreign automakers and create their own models based on them. This will probably be both cheaper and faster.

But the main plans to optimize and expand production and bring it to higher profitability are being built for the long term - no earlier than four to five years. And this requires considerable costs. The head of Rosprom, Boris Aleshin, who is on the board of directors of AvtoVAZ, stated that he intends to demand $5 billion from the state for the development of the automotive industry in the next four years. These funds are necessary for the implementation of the program for the development of the Russian automobile industry developed by Rosprom until 2010. . Moreover, as Mr. Aleshin said, public money should be directed mainly to R&D, subsidizing expenses in the social sector and in the form of budget guarantees to subsidize bank interest rates. Now, it seems, another way to attract state money to the auto industry has been invented - through lending from the state bank.

The agreement signed last Friday, reports the press service of AvtoVAZ, envisages “cooperation in the investment sphere, provision of long-term and short-term loans and other credit products, raising funds in foreign and domestic markets, including on a syndicated basis for the implementation of large-scale investment projects of the plant."

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In 2005, AvtoVAZ produced 721.5 thousand cars. At the same time, 89% of products (648 thousand cars) were sold in Russia. In 2006, the company plans to produce 730 thousand cars. The expected increase in production is associated with the development of production of models of the Lada Kalina family.

Anna LANDER