Russia not to allow car giant Avtovaz to collapse

MOSCOW: Russia will not allow its troubled biggest carmaker Avtovaz to collapse, Prime Minister Vladimir Putin told a meeting Monday including an executive from its 25 percent shareholder Renault.

"We understand that if we do nothing ... the company will cease to exist. We will not allow this to happen," Putin told the meeting.

"I want all the shareholders to take an equal part in the joint work and each shareholder can be sure that the Russian government will do everything possible to guarantee the rights of all shareholders," he added.

Along with Renault, the other major shareholders in Avotvaz are Russian brokerage Troika Dialog and state firm Russian Technologies, which have around 25 percent each.

Christian Esteve, head of Renault Europe, promised at the meeting that Renault would continue to support the carmaker. "You can count on the support of Renault, because we feel socially responsible," he said.

Putin warned Renault last week that its stake in Avtovaz could be diluted unless the French auto giant provided help for the crisis-ridden firm, which has already announced plans to cut a quarter of its workforce.

Esteve praised the restructuring at Avtovaz, calling the decisions "painful but necessary," and promised that Renault would develop a "certain number of models" on its production lines.

Avtovaz, the key employer in Tolyatti, a city of 700,000 people on the Volga River, has produced the bulk of its cars using 40-year old equipment and survived on massive aid from the state keen to shield it from foreign competition.

Earlier this year, the government gave 25 billion rubles (0.8 billion dollars) in state aid to keep Avtovaz afloat.

First Deputy Prime Minister Igor Shuvalov is due to visit the carmaker on Thursday.

Renault in February 2008 paid around a billion dollars for a quarter of Avtovaz, angling for a foothold in what promised then to become Europe's fastest growing market.

But since the onset of the global financial crisis, Renault's 25-percent stake has lost much of its shine as the Russian car market turned into a crisis area amid plunging sales as consumers tightened their belts.