AvtoVAZ Finalizes Acquisition of IzhAvto Assembly Plant

VIENNA – Russia’s largest auto maker, AvtoVAZ, acquires the bankrupt IzhAvto production facility based in Izhevsk, the capital in the Russian Republic of Udmurtia.

AvtoVAZ is buying 100% of IzhAvto owner Obyedinennaya Avtomobilnaya Gruppa for RR1.7 billion ($56.9 million).

Lada Granta output to get under way.

Sberbank, which as its largest creditor held a controlling stake in IzhAvto as collateral, created OAG last year to manage production at the Izhevsk-based car plant. OAG took over IzhAvto’s assets in September.

AvtoVAZ plans to invest RR7 billion ($234.1 million) in IzhAvto by 2016, with funding provided by Sberbank. Plans call for annual capacity to be increased from 220,000 units to 360,000 in five years.

IzhAvto suspended output in spring 2009 and filed for bankruptcy in August 2009. Production resumed in September 2010.

The plant makes the Lada 2104 station wagon and 2107 sedan, two rear-wheel-drive models previously built at AvtoVAZ. It also builds the Izh 27175, a light-delivery van based on the Lada 2104, under its own brand.

Production of the new, low-cost Lada Granta launches this month at AvtoVAZ and is expected to expand to IzhAvto in the third quarter of 2012. It will be built on an assembly line that produced vehicles for Kia until 2009.

AvtoVAZ also may transfer production of its Lada Samara range to IzhAvto in 2012. Plans call for production of Renault- and Nissan-badged cars in Izhevsk as well. Exact model plans are to be finalized within the next few months.

IzhAvto assembled 50,476 units for the first nine months of this year, including 10,019 in September.

The Izhevsk plant opened in 1966, at first producing Moskvich cars like those built at the Moskvich plant in Moscow. IzhAvto later produced own versions based on the Moskvich such as the Izh 2125, which launched in 1973 as the first hatchback manufactured in the former Soviet Union.

Production of self-engineered, rear-wheel-drive Izh cars of the Oda family, also known as the Izh 2126 model range, started in the early 1990s in small volumes. Oda hatchback and Fabula station wagon output was phased out in 2005, while the Oda-based Izh 2717 light-delivery van continued.

IzhAvto later assembled older Lada models and Lada-based light-delivery vans as well as Kia cars and SUVs. In 2000, parts manufacturer SOK Group took control of the Izhevsk facility.

Prior to the economic crisis, which resulted in IzhAvto’s 2009 bankruptcy, SOK Group held a 98% stake in the auto maker, but sold most of its shares to previously unknown companies.

The Russian Ministry of the Interior is conducting a criminal investigation of four former top IzhAvto and SOK Group managers accused of maliciously causing the auto maker’s bankruptcy.

The ministry alleges the managers appropriated more than RR6.7 billion ($224.1 million) in money, cars, shares and stock in other companies from IzhAvto's liquid assets in 2008 and 2009.

The Russian Prosecutor General’s Office is attempting to extradite SOK Group owner Yuri Kachmazov and Andrey Frolov, former head of SOK’s automotive activities, from the United Arab Emirates.

Russian authorities have determined Kachmazov and Frolov are living in the U.A.E. and own property in Dubai. The other two managers’ whereabouts are unknown.