Russian car giant on verge of bankruptcy

MOSCOW: Russia's largest carmaker Avtovaz is on the verge of bankruptcy and needs to cut almost 50,000 jobs if it is to have any hope of survival, a newspaper Thursday quoted a ministry memo as saying.

The damning indictment, written by Deputy Industry Minister Andrei Dementiev to the government, also casts doubt on the cooperation with Avtovaz's 25 percent shareholder Renault, the Kommersant daily said.

Avtovaz will at the start of next year have 76.3 billion rubles (2.6 billion dollars) of debts, excluding 9.8 billion rubles (0.3 billion dollars) owed to suppliers, the newspaper quoted Dementiev as saying in the memo penned two weeks ago.

Restructuring such debts is "impossible under market conditions," he said, adding that this means that Avtovaz bears "all the signs envisaged under the legislation for bankruptcy."

The Lada car maker has already announced plans to slash 27,600 jobs from its workforce of 102,000 in a bid to cope with the slumping demand caused by the economic crisis.

But the memo said that current output levels are such that the workforce should stand at only 55,000, meaning job cuts of almost 50,000 should be required.

Keeping current staffing levels will "lead to the irreversible worsening of its financial condition and put into doubt the possibility of the company continuing its activities," it said.

France's Renault in February 2008 paid around a billion dollars for a quarter of Avtovaz, aiming to reap the benefits from what was Europe's fastest growing car market.

But Dementiev's memo said that Renault was "not fulfilling the needs" of the factory in terms of new models, which were "essential for ensuring effective and profitable production."

Accusing Renault of being unwilling to share its technology, Dementiev said Avtovaz risks becoming "completely dependent" on Renault's position on intellectual property.

Prime Minister Vladimir Putin earlier this month warned Renault its stake in Avtovaz could be diluted unless the French auto giant provided help for the crisis-ridden firm.