The government is ready to shell out a billion for another car alliance
The Russian Prime Minister Vladimir Putin visited two automotive enterprises in Naberezhnye Chelny yesterday: KamAZ and the Fiat assembly plant. The difference between the old and the new plants was striking.
The occasion that brought Vladimir Putin to Naberezhnye Chelny was the signing of an agreement between Sollers and the Italian concern Fiat that marked the start of the production of new cars on the FIiat and Chrysler platforms.
It will be a fifty-fifty joint venture. Fiat will contribute intellectual property rights to the new Compact Wide platform worth 150 million euros to the JV. Sollers will contribute its new production capacity costing the same amount. The JV plans to organise the production of motors and gearboxes in Togliatti. The enterprise will produce up to half a million class C, D, off-road and crossover vehicles every year. Investment in the project is estimated at 2.4 billion euros.
As soon as Putin entered the body-welding shop, the place, up until then tranquil and laid-back, sprang into activity. The workers started using their tools, bodies began to be assembled and the assembly line started moving at a brisk pace.
"We are ready to offer a shoulder to support your enterprise with the help of large state-owned banks," the Russian Prime Minister said noting that Sollers was developing at a rapid pace. Putin announced that the Ministry of Industry and Trade had asked the government to provide financial assistance to the plant.
RG has learned about the measures the government plans to take to support the automobile alliance. First, a 2.1 billion euro loan will be granted for a term of 15 years at subsidised interest rates and with a five-year deferment of payment of the principal debt. The authorities will also grant 100 million euros for the development of a new C class model as part of financing R&D for key innovative projects. Other government assistance will include subsidising interest on loans to finance the export programme and a targeted 30 million rouble subsidy to the employment agencies of Tatarstan to fund training of personnel for the industry in advance.
According to RG information, the option of including a bank as a minority shareholder in the JV is under consideration.
The new plant is to become the main rival of another automotive giant, AvtoVAZ plus Renault-Nissan, according to the government. This provision is included in a strategy for development of the Russian automotive industry until 2020, which is still working its way through the government. The document will be discussed by the government in early March 2010, Industry and Trade Minister Viktor Khristenko told RG. "The plants will complement each other in the car-making segment," Khristenko said.
The plant's workers are aware of the importance of competition: they are well behaved and neat in appearance and the workshops are well set up. Mechanical assembly of vehicles, a humdrum process, is cheered up by the pink and orange walls. "People who come to us from other plants are stunned: white walls and clean floors," a Sollers worker told RG's correspondent.
At the KamAZ plant, Putin visited its sporting centre.
The KamAZ truck racing team, the only one of its kind in Russia, is at the top of the world rankings. In 2009 an international off-road rally The Silk Route organised by KamAZ as part of the Dakar series, had great international resonance. In the event, the race was held between Kazan and Ashkhabad.
This year the Silk Route will pass between St Petersburg and Sochi, as the Prime Minister was told by the Russian team's coach Semyon Yakubov who believes it makes sense from the point of view of logistics: foreigners can easily get to St Petersburg and just as easily travel to Europe from the southern end in Sochi. "The Silk Route cost 15 million euros, I think we will fit into that sum regardless of the route," Yakubov told Putin. After a moment's silence, Putin replied: "It's a deal." As soon as Putin left the centre, the drivers embraced their coach shouting "Yes, yes."
Another piece of good news for the auto giant was that foreign investors had decided to increase their share in KamAZ from 10% to 15%. By buying shares from the investment company Troika Dialog, the German Daimler concern will increase its stake to 11%. Among KamAZ shareholders will be the European Bank for Reconstruction and Development (4%). The deal was sealed yesterday in a memorandum of intent on the main terms of strategic partnership.
In addition, it was announced yesterday that the government could increase its stake in KamAZ through the Rostekhnologii state corporation. "We will consider that option shortly," Putin said. The head of Rostekhnologii, Sergey Chemezov, said his corporation would like to increase its share by 12%, but they have an agreement with Daimler whereby neither company would seek to gain a controlling stake.