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GM Makes Final Offer to AvtoVAZ
Russia’s office of General Motors announced Wednesday, October 19, 2005, it has made the last offer to AvtoVAZ concerning a joint venture that will make engines and transmission gears. AvtoVAZ BOD is expected to decide on the issue at the meeting slated for October 27. The project budget is said to equal from $450 million to $500 million with AvtoVAZ covering the better part of the costs.
Warren Brown, executive manager of General Motors (GM) in Russia and CIS, announced yesterday AvtoVAZ was made the last and the most advantageous offer on setting up an engine production works in Toliyatti. Brown declined to elaborate either on technical or economic parameters of the project.
GM first approached AvtoVAZ with that offer far back in 2001 but was turned down by the management of automobile works. The question was raised two times more with the latest offer setting forth joint investment of $450 million to $500 million to create an enterprise capable of making from 300,000 to 350,000 engines on year. According to a source with AvtoVAZ management, with the project budget of $450 million, the works will have to invest around $280 million to $300 million in the joint venture.
But it is not the money, which is the prime concern of AvtoVAZ in respect of the project. Russia’s car giant might fear competition between the product of the joint venture and the own product of AvtoVAZ. “Once an engine assembly enterprise is launched in Toliyatti, the prime cost of the engines will go down by $1300 to 1400 for Chevrolet Niva, while the price of Lada with such engines installed will rise by $600 to 800", sources with Gazinvest told Kommersant.
www.kommersant.com
All the Article in Russian as of Oct. 20, 2005
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