GM, VAZ Mull $1Bln Factory
By Alex Nicholson
Staff Writer GM-AvtoVAZ said Saturday that it was close to finalizing a deal to build an engine factory in Tolyatti that would set a new foreign investment record for the auto industry and create a powerful third force on the domestic market.
The company did not provide a figure, but analysts said the required investment could approach $1 billion.
"The proposed investment -- if this project is approved -- will certainly be the highest to date in the Russian automotive industry," GM-AvtoVAZ spokeswoman Natalia Kramarenko said Saturday.
The company is considering building a plant with capacity ranging from 200,000 to 500,000 Opel FAM-1 engines per year.
However, Kramarenko dismissed media reports that construction in Tolyatti would get under way this summer. Construction -- when it does start -- would take about two years, she said.
AvtoVAZ has already filed a request for a plot of land with the Tolyatti administration's industrial wing, Vedomosti quoted department head Vladimir Pyl as saying. The exact location will only be decided when the details of the project are finalized, Pyl said.
GM-AvtoVAZ said it was unaware of the land request.
"It remains to be seen," Kramarenko said, whether the European Bank for Reconstruction and Development, which holds a 17 percent stake in the GM-AvtoVAZ joint venture, will participate in the plant construction.
First and foremost, the FAM-1 engine is intended for use in GM-AvtoVAZ's Chevy-Niva and the planned domestic production of the Opel Astra, said Gairat Salimov, auto analyst at Troika Dialog. The new plant would most likely also supply parts for AvtoVAZ's new Kalina model and the 2170, which will replace the old 2110, or "desyatka," he said.
"This factory will be very important for AvtoVAZ," Salimov said.
Salimov said the new company would also be targeting automakers throughout the country. Engine production is currently dominated by AvtoVAZ, with an annual capacity of 800,000, and Severstal's Zavolzhsky plant, which produced 287,000 engines last year and is actively exporting to China.
The total number of cars in Russia is expected to swell from 23 million today to 33 million by 2010, Salimov said. Taking into account replacements, such growth would require 17 million new vehicles, or 2.8 million new vehicles per year.
The $332 million GM-AvtoVAZ union in 2001 was the biggest foreign investment to date in the Russian auto sector. In what was effectively a brownfield project, Salimov said, the company invested the equivalent of $3.3 million per 1,000 units of annual capacity. By comparison, Ford spent $6 million per 1,000 units at its $150 million St. Petersburg plant, which has a capacity of 25,000 vehicles and opened in 2002. |
