The Togliatti-based automotive giant AvtoVAZ has acquired a new asset.
The government decided to reopen the Izhavto automotive plant in Izhevsk, Udmurtia, which had become defunct as a result of the crisis. AvtoVAZ will purchase its main assets, and Prime Minister Vladimir Putin said within four years, the company would employ almost 7,000 workers.
Prior to shutdown, Izhavto had ranked among the five largest automakers in Russia. The Izhevsk-based enterprise manufactured Izh-21175 and VAZ-2104 vehicles, in addition to assembling the Kia Spectra and Kia Sorento. But its workers' employment was cut to part-time starting in April 2009. Thereafter, the plant would intermittently experience total shutdowns. Izhavto debts eventually ran up to 13 billion roubles. In September 2010, Prime Minister Vladimir Putin visited the plant and promised that the government would do its best to rectify the situation. The assembly line was restarted, and it churned out 4,000 vehicles in September-November 2010.
"This is, obviously, not enough to facilitate the company's sustained performance. But it is certainly a crucial event for the country and for the [Udmurt] republic," Putin said at his Novo-Ogaryovo residence.
The government decided enlist the support of AvtoVAZ in Izhavto's bailout. Sberbank, Izhavto's main creditor, will issue a loan to AvtoVAZ so that it can take over Izhavto assets next spring. The plant is already moving to implement a corporate-expansion programme drafted by AvtoVAZ. However, Sberbank realises that Izhavto may be unable to repay its debt in full.
"This is a very good decision and a reasonable plan. In any case, AvtoVAZ lacks the funding necessary to independently restart production at Izhavto. Sberbank will recover some debts, including its previous investment, as a result of the plant's operation," said Oleg Datskiv, a business development director at the AutoDealer.ru online portal.
Under the AvtoVAZ business plan, Izhavto may assemble as many as 126,000 vehicles next year, boosting production to 300,000 by 2014.
However, Izhavto will stop assembling South Korean cars under its previous agreements. "Our Korean partners will be offered an alternative," said Sberbank CEO German Gref.
By Yulia Shestopyorova