Vladimir Putin buys Niva
Prime Minister Vladimir Putin visited AvtoVAZ on Monday. His visit was a windfall for Russia's largest automaker and its workers. The auto giant's stocks surged 40% as a result.
He met with the plant's workers at the Lada Kalina assembly shop. "I have some good news and some bad news. Which would you like to hear first?" the Prime Minister said tactfully sitting in a large executive chair in the centre of the circle formed by his audience.
They finally decided to begin with the most urgent issue. The Prime Minister said he was not happy with the global economic indices, which suggest an on-going stagnation. No one knows when this downturn will reach the bottom, Mr Putin said.
His "bad news" didn't seem to upset anyone much. What really upset them, the workers said, is the frequent media ridicule of the largest Russian automaker's products. Everyone is happy "to take a swipe at us," whereas "our cars are the best for Russian roads," they complained to him.
At this point, the Prime Minister began speaking like a qualified psychoanalyst, assuring his audience that he in no way approved of the negative campaign against AvtoVAZ and Russia's automotive industry as a whole. "I am confident that your company has a better future," he said reassuringly.
Finally he told them that he personally had recently added a Niva off-roader to his own collection of rare cars.
He said he never doubted that measures to support AvtoVAZ would become larger and more substantial. He was referring to the 30 billion roubles the Government allocated to buy Russian-made cars for government officials. AvtoVAZ is supplying most of them.
Mr Putin also promised another 20 billion roubles to AvtoVAZ so that the company could pay its suppliers.
The auto giant's current loan debt totals 36 billion roubles, or 44 billion including bonds. The company was badly hit in September and October 2008 by the 60% rise in sheet metal prices, which naturally pushed auto component costs up 12%.
The company's 2008 losses have been preliminarily estimated at 6.2 billion roubles. Its key production lines had to be shut down in early 2009.
In January and February of this year, AvtoVAZ sold 58,500 Ladas in Russia, down 37% over last year, and produced 29,500 cars and car assembly kits, down 77%. The company's earnings dropped by half, to 9.8 billion roubles.
Mr Putin offered more good news to Togliatti automakers. The Government has decided to allocate 700 million roubles to support jobs in the Samara Region and another 300 million for local Small and Medium-Sized Enterprise (SME) development.
However, all of his statements, including assurances of government support, had a clear underlying tone: although Russia has accumulated substantial cash reserves, they are not inexhaustible.
His meeting with AvtoVAZ workers was no exception. "Our goal is to manage our reserves carefully. We must develop an antidote to problems and take a path of wise development and refill the reserves. We use part of the reserves to cover planned expenses, then normalise growth rates and begin accumulating reserves again," he underlined.
Pierre Sidibe