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Renault to sign contract for 25% stake in AvtoVAZ by Feb 25

A contract to give French giant Renault a 25% blocking stake in Russia’s largest carmaker AvtoVAZ should be signed by February 25, the head of the Russian Technology state-run corporation said on Saturday.

The Russian Technology Corporation, to comprise Russia’s arms exporter Rosoboronexport, Troika Capital Partners, a subsidiary of the Troika Dialog brokerage and investment company, and Renault-Nissan alliance, signed a trilateral memorandum of understanding in Togliatti in southern Russia, where AvtoVAZ is based, on Saturday. „The protocol of intentions we have signed says that we are obliged to draft a contract to be signed before February 25,” Sergei Chemezov, the former head of Rosoboronexport, said. The official earlier said that the company was set to sell a blocking stake in AvtoVAZ to a Western car manufacturer in a bid to find a long-awaited strategic partner. He had named GM, Fiat, Renault and Magna as possible contenders.

Renault already owns 25% in AvtoVAZ, and will control the stake de facto after February 25. Russian Technology will have a 50% blocking stake in the Russian carmaker regardless, Chemezov said. Renault launched production of inexpensive Renault Logan cars in Russia in late 2005 at the Moscow-based Avtoframos plant, in which the Moscow city government has a stake. The French carmaker invested $250 million in the project.

Rosoboronexport, which controls AvtoVAZ, values the company at about $4 billion. In 2006, the carmaker received 2.5 billion rubles ($100 million) in net profit, almost 80% more than in 2005. Revenue in 2006 gained 15% on 2005 to reach 152.4 billion rubles ($6.1 billion). In 2007, the company expects a total of 166 billion rubles ($6.6 billion) in revenue. „Our major demand to Renault is that it preserve the Lada brand and develop it further,” Chemezov said, adding that AvtoVAZ would continue to work jointly with France to develop the C class platform, to cost around $12,000-$15,000.

Carlos Ghosn, Renault-Nissan CEO, told the press that AvtoVAZ would produce 1.5 million Lada, Renault and Nissan cars a year. The parties to the agreement are committed to slashing the costs of all finished products in order to increase competitiveness. „We are ready to preserve the plant’s individuality. Everyone will be a winner in these circumstances,” Ghosn said. „Investment in the modernization of AvtoVAZ capacities and development of a C class car has been estimated at $900 million,” Chemezov said. Regional Governor Vladimir Artyakov said the agreement was of paramount significance to the Samara Region, where more new jobs will be created and a Togliatti technological park established. (