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Russia no longer hopes to give AvtoVAZ a new lease
Russia no longer hopes to give AvtoVAZ a new lease of life single-handed. Renault bought its blocking stake, 25% plus one share, for $1 billion on February 29.

It intends to double the Russian automotive mammoth's output, with prospects to obtain its controlling stake next summer.

The billion dollars has come in handy. AvtoVAZ bosses will be able to use it for the most urgent debt payments.

Another Renault-AvtoVAZ deal came hand in hand with the stock sale. That was a strategic partnership contract, on which AvtoVAZ, with last year's output of 770,000 cars, will manufacture 1.5 million Ladas, Renaults and Nissans a year by 2012.

Survival of the Lada brand is the main goal of the contract, the two companies say, though the new Lada concept will be based on Renault now.

Renault hopes to acquire another 25% block in summer to become the biggest AvtoVAZ holder, with stock placing in Russia and the London Stock Exchange in September.

Renault will appoint its people to key managerial posts in manufacture, planning and purchasing. Strangled by competitors in both East and West, AvtoVAZ is lucky to enter into such a formidable partnership.

The contract makes it clear at last which road the Russian automotive industry will take after a long and trying choice between self-reliance and junior partnership with overseas giants, which have meanwhile obtained a large part of the Russian automobile market.

Until now, they had two ways of penetrating this market. Some started production in Russia from scratch, as, for example, Ford in the Leningrad Region. Others established joint ventures, for example GM-AvtoVAZ, a branch of General Motors, which was set up in 2002. Renault chose a new pattern-direct participation in Russian corporate capital with prospects for the controlling stake.

AvtoVAZ had different plans when the government monopoly Rosoboronexport obtained control of it at the end of 2005. The leading Russian arms dealer, which is selling the stock now, had plans as ambitious as Renault's. It intended to launch new makes and boost the output to an annual million or even 1.5 million with four new platforms.

Epitomizing AvtoVAZ hopes was an automotive industry development concept elaborated by the Industry and Energy Ministry in 2006, with $5 billion government investment. Russia, however, proved to be too clever to waste time and money on ambitious but outdated plans.

The opinions expressed in this article are the author's and do not necessarily represent those of RIA Novosti.


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