GM says makes progress on Russian car plant deal


FRANKFURT, May 30 (Reuters) - General Motors Corp is in advanced talks to set up a car plant in Russia but has not yet clinched the deal, a spokesman for GM Europe said on Tuesday.

He was reacting to comments made by Russian Economy Minister German Gref, who was quoted by the Interfax news agency as saying on Monday that the world's biggest carmaker had agreed to invest $200 million to build a new factory near St Petersburg.

"GM has not confirmed that a deal is finalised although it has made progress," the company spokesman said.

Another GM spokesman said details such as buying real estate and signing a strategic investor agreement still needed to be settled but a deal may emerge soon after GM Europe President Carl-Peter Forster met Russian officials on Monday.

Both sides have already agreed on customs duty treatment for imported parts, he added.

GM already manufactures vehicles in Russia via a joint venture with AvtoVaz , although relations have been somewhat strained of late.

AvtoVaz has taken a more assertive stance with GM since Russian state arms exporter Rosoboronexport installed new management at the automaker, which sold 720,000 cars last year.

AvtoVaz, which has long struggled to lift sales of its cheap but clunky Lada models, has announced it would build a new state-funded car plant and might close the joint venture with GM.

The Tolyatti plant on the southern Volga near the border with Kazakhstan builds 50,000 Chevrolet Niva sport utility vehicles and Viva saloons a year.

AvtoVaz's strategy shift comes as Russia seeks to create an auto industry champion to rival foreign carmakers, whose sales of imported and locally assembled cars are booming.

International auditor Ernst & Young estimates Russia's car market at 1.84 million vehicles last year, up 14.4 percent from 2004. Sales of new foreign cars in Russia rose 60 percent in 2005 to 563,400 vehicles.

Russians are estimated to have spent more than $22 billion on vehicles in 2005, of which more than half went on new imported cars, according to Ernst & Young's data.

On Monday Volkswagen signed a deal to spend 370 million euros building an assembly plant in Russia's Kaluga region.

Ford Motor Co and France's Renault already have car plants in Russia and Japan's Toyota Motor Corp started building a large plant near St. Petersburg last year.

Nissan Motor Co Ltd has also announced plans to build a $200-million plant in the country.



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