Publication: Monitor Volume: 2 Issue: 223

The Volga Auto Plant (VAZ), which produces Lada cars, is facing bankruptcy. The company, located in Samara oblast, is Russia’s biggest car producer. First deputy prime minister Vladimir Potanin told yesterday’s meeting of the special government committee set up to collect taxes that VAZ owes the equivalent of $2 billion in taxes. VAZ has long ranked as the number-one debtor to the federal budget, but in the past it has warded off threats of bankruptcy by negotiating special tax concessions. For all its problems, VAZ remains a major Russian export earner and a vital part of the economy of the Volga region. With 110,000 workers, it is Russia’s eighth largest employer. But Potanin said yesterday that the government will launch bankruptcy proceedings unless VAZ takes steps to reschedule its debts. He said the government is considering several options. One of these would involve the auto giant agreeing to a takeover by outside investors; the workforce currently owns 49 percent of the company’s equity. Potanin said the government would give VAZ two months in which to decide. (Itar-Tass, NTV, AP, November 26)

Meanwhile, the head of Russia’s bankruptcy agency, Petr Mostovoi, speculated today that Italy’s FIAT or an Asian car producer might be interested in acquiring control of VAZ. FIAT played a major role in the construction of VAZ in the 1970s, when western production methods were first introduced to Soviet factories. (Itar-Tass, November 27) At present, the company’s annual profits amount to less than it owes in unpaid taxes.

Russia, France Agree on Tsarist Debt Settlement.