Visits within Russia

30 march, 2009 16:28

Prime Minister Vladimir Putin chaired a meeting on implementing measures to stabilise and improve the situation in the Russian automotive industry

"We are ready to discuss additional measures which can and must be implemented in order to keep the Russian automotive industry afloat, to overcome the crisis and to create favourable conditions for sustained post-crisis development."
Vladimir Putin
Meeting on implementing measures to stabilise and improve the situation in the Russian automotive industry

Vladimir Putin's introductory speech:

Good afternoon,

We have repeatedly discussed problems of the automotive industry at various meetings, have noted the need to boost car sales, and have charted a number of measures for increasing demand and fulfilling state contracts.

I would like to remind you that this is linked with subsidising two-thirds of the Central Bank's refinancing rate for individuals taking out car loans of up to 350,000 roubles. This is linked with more substantial state purchases. We have allocated 12.5 billion roubles for various ministries and departments, and have established a special Transport Ministry leasing fund, due to receive ten billion roubles. We have set aside the required resources for additional motor vehicle purchases by regional and municipal authorities. We are allocating 20 billion roubles out of the federal budget for such purposes and hope that the regions will contribute ten billion roubles as planned.

Today, we are ready to discuss the federal budget's involvement in restructuring present-day debts owed to various budgetary system levels. We are ready to discuss additional measures which can and must be implemented in order to keep the Russian automotive industry afloat, to overcome the crisis and to create favourable conditions for sustained post-crisis development.

There are plans to examine all these issues during our joint work today.

Vladimir Putin's concluding remarks:

We met in Naberezhniye Chelny on December 19 and discussed practically all these problems. Something has been done, as we recognized today, but let's face it, the situation in the auto industry remains complicated. The enterprises in this sector are working at an erratic pace, the assembly lines stop periodically, practically all the enterprises have introduced a 4- or even 3-day week, and some of the workers have been sent on forced leaves. The auto industry is very sensitive to demand trends, so our main decisions were aimed at putting together the necessary package of orders for the enterprises and ensure their financial stability. Today we noted that for some segments of the automobile industry, the government order is critical.

In February of this year the Government allocated an additional 12.5 billion roubles for centralized procurement of automobiles for government needs. We have just been talking about it and I would like to stress - and I am appealing to the heads of government bodies present here - that all the plans must be fulfilled in short order. Everything must be done by the middle of April. We will introduce amendments to the draft protocol and wherever possible - for the Ministry of Defense, the Ministry of the Interior, and the Ministry for Emergencies - we will put this work on the same footing as the state defense order. These measures will ensure that advance payments can be made in larger amounts and faster than through tenders.

I would like to stress that the present situation is such that money from the accounts of government agencies should reach the concrete enterprises as quickly as possible. Delays under the pretext of bureaucratic procedures are absolutely inadmissible today.

The other day the Government approved the procedure for the distribution of state subsidies for the purchase of transportation and utilities technology for the needs of the regions and municipalities. As one executive of the Ministry of Regions said, in April the subsidies are to be disbursed and tenders to procure automobiles through the regions must begin to be held. I repeat, the Ministry will agree with the regions on further work when the subsidies are issued so that there are no delays. The federal budget has allocated 20 billion roubles and the subjects of the Federation will put up 10 billion for the same purpose.

We should look more closely at the budget potential of various regions and also proceed from the realities on the ground. This programme will not only support the auto makers but will seriously replenish the fleets of public transportation, social and utilities services, and law enforcement bodies. Naturally, only Russian-made vehicles will be procured.

The Ministry of Regional Development should organize effective work to sign these agreements. In fact, a decision has been made in principle to step up work on leasing schemes in the procurement of automobiles by government institutions. We have just heard that the work to create a specialized leasing company for the Ministry of Transport has been completed. I hope that it will start working and placing orders and will hold the relevant tenders in the near future. How much time will you need to start this work?

Work should get under way before April 6.

Now, as for consumer support, the legal framework is already in place for launching the programme of subsidizing interest on loans for purchasing domestically-made cars priced up to 350,000 roubles. I am referring not only to the traditional Russian brands, but also to foreign cars assembled in Russia. As has been mentioned here, the Ford Company, which has a production facility in the Leningrad region, has made the reasonable decision to cut the base price of one of its models to 345,000 roubles. In this way, it is participating in our programme of consumer support. I think this should be encouraged in every way possible. The corresponding agencies should inform the public about the procedure for granting subsidized auto credits.

In addition to solving the current problems, we should not forget about long-term development plans to continue the investment programmes already under way or to implement new projects. One such project is the construction of a car assembly plant in the Far East. We discussed this today, as well. In order to build that enterprise, access to "long money" is needed - for example, by issuing bonds in the market. This topic was also discussed today. We will in every way support the relevant proposals of the Central Bank. All these measures will hopefully combine to play a positive role. I will not speak about subsidies of haulage by rail at this point, but this was also discussed today. All these measures together must make a difference.

I agree with you that work should start in the sector that will be driven by demand from the government, the regions, and municipalities. We can consider any measures as long as they allow us to move forward.

Now, concerning some issues that affect specific enterprises: AvtoVAZ, GAZ, Sollers, and KAMAZ. Hundreds of thousands of jobs, including in the related industries, depend on their stability. They also replenish the budgets of Samara, Nizhny Novgorod, and other regions. Today we discussed the algorithms of taking these automobile plants out of the crisis.

First a few words about VAZ. Based on the preliminary analysis of the situation and the discussion today, I think we can afford to allocate 25 billion roubles to redeem earlier credits to restore the current solvency of this enterprise through Rostekhologii Corporation. The money will be disbursed as the material contribution and then transferred to AvtoVAZ as an interest-free loan. What to do next is up to the shareholders themselves. We will not press to change the stakes, being mindful of the interests of all the shareholders, including minority shareholders. If necessary, we may extend the loan if we review the situation in a year's time and conclude that AvtoVAZ needs such actions and such support on the part of the government.

I also believe it is possible to restructure AvtoVAZ debts to the federal budget - that is, allowing it to its tax arrears not in 2009-2015, but in 2011-2017. As I said today, it would save the enterprise about 1.5 billion roubles.

The same measure may be taken with regard to ZIL, in which case said company would save 800 million roubles. As for the material contribution to Rostekhnologii Corporation and the subsequent loan, this should be done as quickly as possible. The deadline is late April or early May, May 10. By that date, all the necessary documents for that transaction should be ready.

In the coming days our state-owned banks - Sberbank and VTB - must issue a short-term credit in the amount of 8.5 billion roubles, the so-called bridge fast, to give the enterprise immediate support. Rostekhologii will be the guarantor of that loan, too.

Now for GAZ. The governor made a very convincing case for supporting the enterprise and analyzed the situation. I agree with him and I believe that it is high time to stop the talk about state guarantees in order to reschedule the former debts. I hope that preliminary agreements between banks will be fulfilled. Having said that, I should note that the banks too must be aware of their responsibility. They share these risks - true, they exposed themselves when the situation was favourable - but still these are their professional risks, a fact that must be kept in mind.

At the same time, I think it is possible to offer the necessary government guarantees - a little over 4 billion roubles - to fully reschedule GAZ debts to its creditors. The state must act as a guarantor. I hope this measure will help the enterprise get out of the current situation and gain the necessary momentum for the future.

I think we can also solve the problem connected with the refund of the excess tax in the amount of 2 billion roubles paid by GAZ by increasing state procurement. The total volume of procurement will be about 9 billion roubles, like you have suggested.

As for subsidizing the interest rate on the purchase of some types of automobiles, this issue needs additional study.

State guarantees will also be extended to KAMAZ and Sollers, 4.6 and 5 billion roubles, respectively, in guarantees of investment programmes and projects.

Speaking about GAZ, we have discussed possible assistance to the investment project to produce a new generation engine at one of the group's enterprises, the Diesel plant in Yaroslavl. I remember that project. I think it merits attention and support. It is necessary to make the final calculations and I think additional resources should be found to replenish the enterprise's turnover assets. The project fills a real need and it must get state backing. For their part, the management and owners of the enterprises should work hard and make their contribution to the stability of the industry and of individual enterprises, so that they will have good development prospects in the post-crisis period.

I am not going to list all of the obligations of the management and the owners, but cutting production costs is one of them. It applies to all the enterprises represented here today, whose managers are sitting at this table, including the management of VAZ. The VAZ management knows it well.

Amid the crisis, costs should not rise; on the contrary, they should go down. Unfortunately, this is not always the case. Anyway, what I see today is that everyone is committed to optimizing our work. I see the commitment to work together effectively and in spite of all the problems, I sense a good, businesslike attitude.

I am sure that your plans will be realized.

Thank you very much. I wish you all the best.