Prime Minister Vladimir Putin is attempting to peddle AvtoVAZ to France, but so far the French seem unresponsive.
This week, Russia formally proposed that France exchange state-owned interests in major national car manufacturers AvtoVAZ and Renault. Their market values are incommensurable, and under such a transaction, Russia can count on a mere 1.34% stake in the French company. Meanwhile, France has little incentive to increase its already significant interest in AvtoVAZ.
Yesterday at the Technologies in Mechanical Engineering forum (see p. 2 for more detailed coverage), Vladimir Putin suggested that Russia and France exchange shares in AvtoVAZ and Renault. At present, the Russian government controls 25% of AvtoVAZ through Rostekhnologii, and France owns a 15% share in Renault. According to the prime minister, the exchange of "certain shareholdings" could be an "interesting and powerful gesture of cooperation". He claimed that discussions surrounding such a transaction started "quite recently" and that Russia "is neither insisting upon nor urging any measure," but is ready for an exchange, just as it is prepared for Renault to obtain the controlling interest in AvtoVAZ (currently 25%) sooner or later.
Vladimir Putin has not divulged any details of the transaction. Yesterday Renault capitalisation on the Euronext amounted to $11 billion, while AvtoVAZ value on the MICEX was equal to $593 million. It follows that the plant's controling share would bring Russia a mere 1.34% stake in Renault if traded on equal footing. The prime minister admitted that Russia could only count on a "small percentage," and he did not dwell on the France's position. Christian Esteve, head of the Renault office in Russia, who was present at the meeting, declined to comment on the proposal.
It was, however, the first time that Russian authorities officially voiced the idea of exchanging state-owned shareholdings in AvtoVAZ and Renault, which emerged last autumn on the eve of Vladimir Putin's visit to France (see Kommersant of 27 November 2009). Our sources at the time said that if the French agreed to facilitate any alliance between Renault and AvtoVAZ involving cross-ownership, France would be granted easier access to Russian energy resources. Nevertheless, the idea "has not gotten off the ground" since, and "nobody regards it as essential" say our sources among AvtoVAZ shareholders. Yesterday General Director of Rostekhnolologii and AvtoVAZ Board Chairman Sergey Chemezov said the same thing, emphasising that "the idea is still half-baked."
Since the beginning of the crisis Russian authorities have been regularly proposing that Renault build up its interest in AvtoVAZ or establish a global alliance with the plant like Renault-Nissan did. But the Renault press-service has been repeating that the corporation is satisfied with its present share in AvtoVAZ and has no intention to increase it in the near future.
Juli Matevosov of Aton thinks that such an exchange of shares makes no sense. "One can well assume that Russia is interested in being a Renault shareholder, even a minority one, but why should France be an AvtoVAZ shareholder? It is incomprehensible," the analyst said. Andrei Rozhkov of Metropol Research and Consulting Firm added: "AvtoVAZ has no technology of interest for France."
The prime minister's statement could be attributed to the additional issue of AvtoVAZ shares, supposed Vladimir Bespalov of VTB Capital. The plant is going to do it in order to convert part of its debt to Rostekhnologii (65,000 million roubles) into shares and get car assembly equipment from Renault as payment for its own stake. It may so happen, however, that the cost of equipment to be contributed by Renault is not enough for the French to preserve the controlling share in AvtoVAZ – hence the idea of payment for additional shares in Renault securities. Still, one AvtoVAZ shareholder believes that "the idea put forward by the prime minister is purely political and has nothing to do with the additional issue of shares."
By Dmitry Belikov
