"Sable" from Birmingham

GAZ bought the British LDV plant

The management of the GAZ group announced yesterday the acquisition of the British light commercial vehicle plant LDV Holdings, located in Birmingham, England. The plant was purchased from the American investment fund Sun Capital, which acquired the plant after bankruptcy proceedings last year. “Sun Capital assessed its capabilities and decided to resell the asset, realizing that it did not have enough of its own strength to develop it. For us, this enterprise is a good potential for synergy,” says Pyotr Zolotarev, Chairman of the Board of Directors of GAZ. He called the deal the first step in the international expansion of the GAZ group. The parties agreed not to disclose the amount that GAZ paid, but it will appear in the company’s annual report under IFRS. GAZ also bought out the debts of the British plant, which, however, as Mr. Zolotarev assured, were very insignificant.

The owner of 100% of LDV shares was a specially created British company GAZ International, a subsidiary of GAZ OJSC. In addition to managing the business, the company will search and analyze opportunities to expand the group's activities abroad.

Chairman of the Board of Directors of the GAZ Group, Eric Eberhadson, told reporters that the acquisition of LDV is part of the company’s strategic program to become a global international automaker. The program includes the acquisition of new technologies, the conclusion of strategic alliances with foreign automotive corporations, increasing business scale and entering new export markets.

LDV Holdings makes the Maxus light commercial vehicle, which went into production last year on a platform “fundamentally different from those used by GAZ,” Mr. Aberhadson says. Therefore, the GAZ group expects not only to develop production at facilities in the UK, but also to transfer it to Russia. However, at the first stage it is planned to expand and refine the model range of the British plant and reach a larger production volume. At the second stage (from 2008), it is planned to create production in Nizhny Novgorod at GAZ facilities. The company expects to initially produce 20 thousand cars based on Maxus (with left-hand drive) in Nizhny, which will be supplied mainly to the domestic market and the CIS countries. The Birmingham-based Maxus will be sold through the existing LDV dealer network. The planned production volume of these machines in 2006 is 10 thousand units. The plant's capacity allows it to produce up to 15 thousand cars per year. These cars are sold not only in Britain and Europe, but also in Turkey and Malaysia.

GAZ does not see a threat to competition from its own cars when introducing a new British model into production. GAZ believes that the launch of Maxus in Nizhny Novgorod will allow it to offer customers a new product in the shortest possible time, without the cost of development and launch into production, which will complement the existing line of Gazelles-Sables in a higher price group. According to Mr. Aberhadson, in Russia, cars based on Maxus will cost from 20 thousand dollars. As an important feature of the British car, GAZ executives note that it “has a secondary value,” i.e. can be resold - unlike the Gazelles and Sobols, which have a rather limited service life, as the group leaders themselves admit.

It seems that GAZ's decision to specialize in small and light commercial vehicles (several years ago the company relied on Gazelles and Sobols) has fully justified itself. And now, having gained considerable experience in Russia, GAZ decided to go abroad along the beaten track. This year, the company never ceases to amaze with new acquisitions: first a license for the production of Renault Traks engines, then equipment from DaimlerChrysler. GAZ realized that it was much more efficient to buy and modernize ready-made technologies than to reinvent the wheel.

To manage production in the UK and develop export areas, the GAZ Group intends to hire two British managers, the most respected leaders in the industry. LDV Holdings will be chaired by Martin Leach, who once served as President and Chief Operating Officer of Ford Europe and CEO of Maserati SpA. The company's CEO will be Steve Young, who worked as head of automotive at the international consulting company AT Kearney, and also held senior positions at British Leyland and Ford Europe. However, Mr. Zolotarev said that engineers from the group’s Russian enterprises could also be useful at the Birmingham plant.

Anna LANDER