Renault participates in the financial strengthening of Russian Avtovaz

French Renault and other shareholders of Avtovaz injected just over one billion euros into the largest Russian car manufacturer to help it resolve financial issues and capitalize on market recovery.

The transaction was largely executed through the conversion of debt into equity, and its total value is 107 billion rubles (1.3 billion euros), announced Rostec, a state-owned conglomerate and shareholder of Avtovaz, along with the Renault-Nissan group, on Wednesday.

– This is the largest transaction in the history of the Russian automotive industry…, said Rostec director Sergei Chemezov according to a statement.

– In fact, more than 100 billion rubles have been invested in the development of the factory and the LADA brand, he emphasized.

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Through restructuring, Renault-Nissan’s stake in the joint investment with Rostec increases to 61.1 percent, while the stake of that joint venture in Avtovaz rises to 83.5 percent.

The restructuring is part of a financial recovery plan for the Russian car manufacturer, which has been brought to the brink of collapse after international sanctions and a sharp decline in oil prices on the global market severely impacted the Russian economy and car sales. The West imposed sanctions on Moscow due to its role in the unrest in Ukraine, AFP reminds us.

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Economic crises have particularly hit Avtovaz hard, the largest car manufacturer in the former Soviet Union, as evidenced by the data showing a halving of car sales in the domestic market at the beginning of this year.

Its factory in the city of Tolyatti now employs half as many workers as it did a decade ago, and currently, in addition to its own Lada models, it produces the cheaper brands Dacia and Datsun from the Renault-Nissan group.

Thanks to the recovery of the Russian economy after a two-year recession, Russian car sales increased by 12 percent last year. Under such conditions, Lada sales rose by 17 percent, and the company returned to operating profit, AFP notes.