GM Sees Russia Sales Rise, Poised to Break Ground on New Plant

General Motors Corp. touts its rapid sales growth in Russia just a few days before the auto maker is expected to launch construction of a new plant in the expanding market.

GM formally will break ground on a new plant outside St. Petersburg June 13, according to company sources and wire reports. Chairman and CEO Rick Wagoner reportedly is slated to attend the groundbreaking.

There has been no official word on the plant from GM, but Reuters quotes an unnamed source close to the project as saying the facility will have annual capacity of 25,000 vehicles and cost about $100 million to build on a greenfield site.

GM already has a joint venture to produce the Chevy Niva SUV and Viva sedan with Russian car maker OAO AvtoVAZ. But recent media reports have chronicled a deteriorating relationship between the two partners.

Russian manufacturer ZAO Avtotor also assembles some GM models.

In advance of the possible new plant announcement, GM notes 41.7% sales growth in Russia during the first five months of the year. May sales grew 79.2% there, while deliveries in Ukraine jumped 57.2%, based on preliminary registration figures, GM says.

GM currently makes Chevy Niva in partnership with Russian auto maker AvtoVaz.

The auto maker also reports a 10.5% boost in its European vehicle sales in May to 188,896 units.

GM isn’t the only car maker showing renewed interest in Russia.

Last month, Volkswagen AG signed an agreement to spend €370 million ($474 million) to build a new plant in Kaluga, Russia. VW says its management board has approved construction of the plant, which will have an initial production capacity of 20,000 vehicles annually.

Its first product will be the Skoda Octavia, which will be assembled from semi-knocked-down kits. Output will begin in the second half of 2007.

A body and paint shop will be added in 2009, boosting the plant’s capacity to 115,000 units.

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