Renault receives ultimatum from Putin to fund AvtoVAZ

Article by Christian Andrei, on August 29, 2010

Everyone's waiting to see how French automaker Renault SA would respond to Russian Prime Minister Vladimir Putin's ultimatum to help Russian automaker AvtoVAZ or see its stake reduced. Putin said in front of government officials that Renault has to help fund the enterprise or its stakes would have to be divided.

It can be recalled that Renault had bought a quarter of the state-run firm for more than $1 billion a couple of years ago. Putin is putting his foot down for good reason.

AvtoVAZ, Russia's largest automaker, will implement the largest set of layoffs in a single Russian city and plans to cut a quarter of its staff (roughly 27,600 workers) in Togliatti.

The layoffs have become necessary due to the 44% decline in sales of AvtoVAZ's Lada. If this pushes through, Putin will have a difficult time trying to avoid unrest due to the recession that followed years of incredible growth, says Autonews.

If you don´t know much about AvtoVAZ, it's a Soviet-era company that continues to produce the clunky Lada models on outdated 1960s equipment. It stays afloat only due to decades of state money injections.

When Renault purchased the stake, there was a twinge of hope that it will finally be modernized. It's just too bad that the economic downturn delayed restructuring plans.

Topics: renault, russia, avtovaz

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