GM seeks stake in Russian carmaker

General Motors Corp. is bidding for a substantial stake in Russia's largest carmaker, OAO AvtoVAZ, to strengthen its position in one of the world's fastest-growing major auto markets.

In Russia, "the market is growing 30 percent year-on-year and GM's sales growth is close to 100 percent, so we're experiencing enormous demand for our products," said Marc Kempe, a GM spokesman in Europe.

"We're exploring a variety of ways to meet this demand, and this is one possible way forward."

Kempe did not disclose the size of the bid but said it was for a significant stake in AvtoVAZ, which is GM's manufacturing partner in Russia.

State-controlled AvtoVAZ, founded in 1966 with assistance from Italy's Fiat SpA, produces close to 700,000 vehicles a year, including Lada cars. In 2001, GM and AvtoVAZ formed a venture that produced about 50,000 Chevrolet-badged vehicles in each of the past three years.

But relations between the partners have been strained at times, and AvtoVAZ has sought additional partnerships to obtain technology to compete against foreign brands piling into the lucrative Russian market.

Last year, while new car sales rose more than 20 percent in Russia, AvtoVAZ's sales grew less than 1 percent, according to consultants Global Insight. By contrast, foreign brand sales surged more than 60 percent in Russia, where a boom in the energy sector is fueling an economic expansion. GM sales rose 73 percent to 132,600 vehicles.

Industry experts say the Russian market is on track to become Europe's second-largest after Germany this year or next. Car and light truck sales are forecast to exceed 2.2 million there this year.

According to media reports in Europe, AvtoVAZ managers have floated the possibility of a sale of 25 percent of the company, and potential bidders are said to include Fiat and France's Renault SA. Detroit News

Leave a Reply