Daimler May Up Kamaz Stake to Secure Foothold in Russian Market

ST. PETERSBURG, Russia – Daimler is moving forward with a plan that would secure its position in the Russian commercial-vehicle market through a sizable increase in its 11% stake in the country’s flagship truck producer, Kamaz.

Daimler’s interest in boosting its holding recently was signaled by Sergei Chemezov, head of state-run Russian Technologies, one of the country’s leading diversified industrial conglomerates and the biggest shareholder of Kamaz at 49.9%.

The German auto maker is expected to purchase an additional 27% of Kamaz from a group of Russian private investors, headed by well-known local businessman Ruben Vardanyan, with the deal to be closed by the end of the year. Russian Technologies would continue to hold 49% of Kamaz.

Chemezov says Daimler initially was interested in acquiring a controlling stake, but the Russian government isn’t likely to allow a foreign investor to take control of the country's iconic truck manufacturer.

Earlier this month, a delegation led by Daimler Trucks CEO Wolfgang Bernhard and Daimler finance chief Matthias Grundler visited Kamaz production facilities in Naberezhnye Chelny, where the company also has its headquarters.

Daimler’s interest in Kamaz is understandable. The Russian truck maker’s financial position has improved greatly in recent years and it has increased its share of the Russian CV market to 40%, up from 34% in 2012, despite a decline in overall industry sales. Kamaz recently paid a dividend to shareholders for the first time.

Business Online Tatarstan, Naberezhnye Chelny’s leading newspaper, says rumors of a greater stake by Daimler first surfaced in January, but talks appeared to stall in March over a disagreement on purchase price. If the new negotiations are consummated, the paper says, Kamaz will gain access to advanced German technology, while Daimler will significantly strengthen its position in Russia’s market.

However, local analysts say a bigger Daimler involvement could have a negative impact on Kamaz’s workforce, which could see massive layoffs as operations are optimized.

There’s also the possibility Daimler would launch production of its own models at Kamaz, possibly cutting the number of vehicles sold with the Kamaz name or potentially eliminating the brand entirely.

Daimler initially acquired a 10% stake in Kamaz in 2008, a deal that valued the company at $300 million. It increased its stake to 11% in 2010.

In recent years the companies have expanded their cooperation, particularly through their Mercedes-Benz Trucks Vostok joint venture that specializes in the production of heavy trucks.

In 2012, the JV produced about 2,500 trucks, and output this year could increase to 3,000 units. Midterm capacity is targeted to rise to 5,000 trucks annually.

The partners are developing a new line of trucks slated to hit the market in 2016.