Kia and Hyundai in talks with IzhAvto to build cars in Russia

Article by Christian Andrei, on September 5, 2010

Russian company IzhAvto is in talks with Kia Motors and Hyundai Motor Co. over the possibility of car assembly at its plant in the city of Izhevsk. At the start of 2009, operations at IzhAvto’s plant were stopped amid Russia's worst economic downturn in 10 years.

This plant can produce up to 220,000 cars annually. IzhAvto’s debts amount to more than 14.5 billion rubles ($498.1 million). The company is currently in bankruptcy. IzhAvto's plant, which once built cars under the Izh brand, is also where Mikhail Kalashnikov’s weapons, such as the AK-47 assault rifles, are made.

Russan state lender Sberbank holds about half of IzhAvto's debt. United Auto Group, which acts as Sberbank’s agent, is driving the project with the Korean firms, which aim to 60,000 vehicles annually.

The group's head Igor Kulgan revealed that this plant is capable of building 45,000 Kia cars and 15,000 Hyundai light commercial trucks.

Sberbank will fund the project. Russian government spokesman Dmitry Peskov said that he hopes that the talks will be successful and that, “all the terms including one on location will be agreed."

Global automakers have been enticed to go to Russia due to its combination of protectionist measures and the incentives to start local assembly lines. [via autonews - sub. required]

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