Renault Close to Finalizing AvtoVAZ Deal

PARIS – Renault SA expects to conclude its deal to take over Russia’s leading auto maker, OAO AvtoVAZ, “in the next few weeks.”

“I was in Russia a week ago and was assured by high authorities that it would go ahead,” Renault CEO Carlos Ghosn says.

Renault will hold 25% equity in AvtoVAZ and will be the sole strategic partner.

“We are in due diligence, talking about management organization, platforms, powertrains and technical exchange,” Ghosn says. “There are no surprises.”

Earlier efforts by other auto makers to join with AvtoVAZ, including that by General Motors Corp., had not gone nearly as far as the Renault effort, he says.

AvtoVAZ has agreed sales of Lada-brand vehicles will be considered part of the Renault group, Ghosn says.

Lada once boasted volumes of 1 million cars annually, but sales have been declining in recent years. Still, once Renault takes control, the Renault Nissan (Motor Co. Ltd.) Alliance will be the third-largest auto maker in the world by volume, trailing only GM and Toyota Motor Corp., Ghosn says.

Deal to help revive Lada brand, Ghosn says.

“In Russia, you have to be there,” he says, adding high import taxes and the exchange rate between the euro and ruble, which fluctuates with the U.S. dollar, make exporting from Europe difficult.

Ghosn says setting up a greenfield plant is costly, but the AvtoVAZ investment will be a win-win for Renault Nissan and Lada because it will re-launch a brand that Russia is proud of and give Renault Nissan access to the low-cost supplier base near AvtoVAZ’s operations in Togliatti, Russia.

Renault’s efforts in another difficult country, Iran, have not been as successful as anticipated. Renault has launched production of the Logan in Iran with the local auto makers as partners, but volumes are far below expectations.

“We have clients in Iran, but we can’t produce cars,” Ghosn says, blaming the situation on suppliers that suffer from credit problems and have difficulty paying bills.

“When we began we had 100,000 orders, 85,000 confirmed orders,” Ghosn says. But those can’t be filled because “a lot of things are not working in the Iranian industrial system.”