Russia's state-controlled Vnesheconombank will issue a 39 billion rouble loan to establish a Ford–Sollers joint venture, Prime Minister Vladimir Putin said at a meeting of the bank's supervisory council. The new joint venture could be operational by late 2011.
Future corporate production relocation levels are to reach 60%, Putin said. He noted that the launching of this ambitious project was particularly important today against a backdrop of the growing national car market. The Russian auto industry expanded passenger car production by 120% January-March 2011.
Vnesheconombank will open a ten-year credit line for the Ford–Sollers joint venture with a total budget of 75 billion roubles. Both partners are to contribute 18 billion roubles each. The joint venture will manufacture cars in Vsevolozhsk in the Leningrad Region, as well as in Naberezhnye Chelny and the Alabuga special economic zone in Yelabuga, both in the Republic of Tatarstan. Analysts say annual production should reach at least 350,000 vehicles.
Sollers, formerly called Severstal-Avto, owns production facilities that assemble Russian-designed UAZ SUVs, South Korea's SsangYong SUVs, Fiat passenger cars and minivans and Japanese-designed Isuzu trucks. The Russian company plans to team up with Ford Motor Company to manufacture six passenger car and minivan models. Moreover, the joint venture plans to launch a die-cast engine production facility. Sollers also promises that the joint venture will implement R&D projects. The joint venture will import Ford vehicles, car components and accessories and will sell them on the Russian market.
Sollers and Ford announced their plans in February 2011. Both companies signed a letter of intent with the Ministry of Economic Development. Under the document, they will implement an industrial assembly contract stipulating production of at least 300,000 cars annually.
Previously, Sollers had cooperated with Italy's Fiat which had independently signed an industrial assembly agreement with the Ministry of Economic Development and also asked Vnesheconombank for a loan. The Russian bank is still in talks with the Italians but will issue a loan only if Fiat chooses a Russian partner. "We are a financial instrument, not a production partner," the bank's Chairman Vladimir Dmitriyev said.
Sergei Udalov, Executive Director with the analytic agency Autostat, said the Italian company will have trouble accomplishing this objective. "I don't see what Russian automaker can join hands with Fiat. A company must have many relatively cheap models to manufacture over 300,000 cars a year. This is impossible with old cars, due to be assembled by Fiat," Udalov noted.
Yulia Shestopyorova