With the help of Zhiguli

OJSC IzhAvto, which completely stopped production due to the crisis in the spring of 2009 and dismissed 5 thousand people, will resume work this week. The assembly of Lada will begin at the plant, and in the future models of the South Korean Hyundai-Kia will be added to them. However, this will not solve IzhAvto’s problems: its capacity will be only half-loaded; in a year, due to the stoppage of Lada production, the issue of expanding the model range will again arise, and the low profitability of contract assembly will not allow quickly repaying the debt of almost 15 billion rubles.

On Friday, Reuters reported that the United Automobile Group (OAS, manages IzhAvto in the interests of creditors) agreed with the Hyundai-Kia concern to resume assembly of its models at IzhAvto facilities. The plant assembled them before the crisis (in particular, the Kia Spectra and Sorento of the previous generation), but completely stopped work and dismissed its staff of 5 thousand people in the spring of 2009. Officially, the Russian offices of Kia and Hyundai declined to comment. The head of the OAS, Igor Kulgan, also did not comment on the Reuters information. However, two Kommersant sources close to the group said that “negotiations with the Korean side are really close to completion.”

According to Kommersant’s interlocutors, Prime Minister Vladimir Putin will arrive at IzhAvto, and during his visit the plant will solemnly launch the assembly line (read about how Mr. Putin launched the plant in the same issue of Kommersant). At the enterprise, everything is ready to start assembling the Lada 2104 from AvtoVAZ car kits (Kommersant described the project on August 27). At the same time, the OAS may announce agreements on the assembly of Hyundai-Kia, Kommersant sources say. The prime minister's press secretary, Dmitry Peskov, declined to comment.

The parties announced back in June that IzhAvto could begin assembling Huyndai-Kia models in the fall. But then Kommersant’s sources in Sberbank (holder of 7.5 billion rubles out of 14.5 billion rubles of the plant’s debt) and at the enterprise itself said that IzhAvto “is not yet ready for the project from a technical point of view.” The fact is that to those models that the plant assembled before the crisis, at least two more new ones should be added: the new generation Sorento and a new version of the Cerato (its assembly in Russia has not yet been carried out). In addition, for Hyundai, the plant may begin assembling commercial models. Kommersant's sources did not say how long it takes to prepare production. The exact launch time of the assembly is still being discussed, adds one of Kommersant’s interlocutors.

Igor Kulgan said that IzhAvto intends to assemble about 60 thousand Hyundai and Kia per year. The plant will assemble another 70-90 thousand cars under the Lada brand - this is a “classic”, and in addition to the Lada 2104 we are talking about models 2105 and 2107. The design capacity of IzhAvto is 220 thousand cars per year, that is, due to two projects, the plant will load its capacity by approximately half. However, by 2012, the assembly of Lada at IzhAvto will be stopped, as Kommersant has already reported. By this time, AvtoVAZ will bring to the market a new low-cost model based on Kalina and wants to remove the “classics” from the market so that its own models do not compete together. Thus, by the end of next year IzhAvto will once again face the issue of capacity utilization. At the same time, the plant produces Lada and Hyundai-Kia on a contract basis, that is, the right to sell cars, with the exception of the Lada 2104, for which it purchased a license, it will not have, recalls Mikhail Pak from Aton Investment Company.

“Contract assembly is not the most profitable business, and it is not entirely clear how IzhAvto is going to pay off its debt to creditors using it, especially when capacity is not fully utilized,” notes Mr. Pak. “For now, the launch of production resembles a solution to social problems.”

“Most likely, when AvtoVAZ stops assembling Lada at IzhAvto facilities, the plant will completely concentrate on assembling Hyundai-Kia, and the model range of the Korean concern at the plant will be expanded,” thinks AG Capital Managing Director Alexander Agibalov. In any case, the Koreans have serious plans in Russia, the expert recalls. Hyundai has been launching its own plant near St. Petersburg since 2011 with a capacity of 150 thousand cars. Based on the results of January-July 2009, Kia ranks second in sales, Hyundai - eighth.

Dmitry Belikov

Koreans will start IzhAvto