OAO AvtoVAZ, Russia's largest carmaker, said seeking protection from creditors is an option it may consider as the Russian government asks for help from partner Renault SA amid plunging auto sales.
The Russian government has given AvtoVAZ 25 billion rubles ($853 million) in emergency loans, while the carmaker has slashed salaries and announced plans to eliminate 21,773 jobs. AvtoVAZ will owe 76.3 billion rubles to financial backers and 9.8 billion rubles to suppliers by the end of the year, the Industry Ministry said last week.
"Seeking protection from creditors is one of the options that our company is considering," Alexander Shmygov, an AvtoVAZ spokesman, said in a telephone interview today.
Renault, the second-biggest French carmaker, paid $1 billion for 25 percent of AvtoVAZ in 2007 and is discussing its role in a recovery plan with other shareholders including the Russian government. Prime Minister Vladimir Putin said earlier this month Renault would have to invest more cash or see its stake diluted.
Carlos Ghosn, chief executive officer of both Renault and Nissan Motor Co., said he's prepared to support AvtoVAZ.
It's "very difficult not being in trouble," Ghosn told reporters in Tokyo today. "We understand that. We are here to support AvtoVAZ."
Convertible Bonds
As it seeks to avoid bankruptcy, the Russian carmaker plans to sell 50 billion rubles of convertible bonds to state banks, Igor Burenkov, a spokesman for AvtoVAZ, said today.
The Russian carmaker will fire 9,075 workers of "pension age" and 5,267 of "pre-pension age," AvtoVAZ President Igor Komarov said today in an e-mailed statement. The manufacturer also will lay off 7,431 employees of "working age" who may be rehired after production is modernized in two years, he said.
"The plans for financial renewal can be varied," Deputy Industry and Trade Minister Andrei Dementiev told reporters in Moscow today. "Let's look at their plan of action and then think about the instruments for realizing it."
AvtoVAZ, Renault and Nissan will invest 240 million euros ($359 million) to revamp production and make five new models, Burenkov said on Oct. 16. Renault and AvtoVAZ will begin joint production of vehicles based on the Boulogne-Billancourt, France-based carmaker's no-frills Logan sedan in 2012, with Nissan models to follow, Komarov told reporters Oct. 9. Renault and Nissan will provide 75 percent of the investment, he said.
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