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Russia: AvtoVAZ board meet to select foreign partner

Russia’s largest automaker AvtoVAZ met Friday to choose a strategic partner among four Western firms eagerly bidding to buy into the country’s booming car market.

Russian business newspaper Kommersant quoted sources Friday as saying the AvtoVAZ board would decide on two final contenders for the sale of a stake slated for the end of January. Italy’s Fiat, whose small-car designs 40 years ago inspired AvtoVAZ’s Soviet models, and Canadian car parts maker Magna, linked to Russian businessman Oleg Deripaska, are seen as the front-runners above bids by General Motors and Renault. AvtoVAZ’s shares rallied on Wednesday on GM’s much-followed public offer for a stake in the Russian carmaker, which has struggled over ownership changes, corporate governance and the influx of foreign competitors into the market.

A six-year joint-venture partner of AvtoVAZ’s, GM saw its sales of Russian-made Chevrolet Niva and Viva vehicles almost double from 132,000 in 2006 to 250,000 in 2007, while facing a sluggish domestic market. Sergei Chemezov, the head of state arms manufacturer Roboronexport, which controls AvtoVAZ, said in September that the company could sell 25% to foreign investors. The Russian auto maker is reportedly asking a high $2 billion for the share, which offers foreign contenders the chance to expand in what was the world’s fastest growing passenger car market last year.

The announcement of minority-stake sale marks a restructuring since the national champion had hoped for a state-funded bailout previously saying foreign cooperation would be limited to parts and equipment. Russia’s former Federal Industry Agency chief Boris Alyoshin, a candidate to head AvtoVAZ next year, said in September that the firm would also get new domestic shareholders, news agency Interfax reported. State managers are rumored to favor negotiations with Canadian car parts maker Magna, in which Russian billionaire Deripaska owns a 20% stake. Chemezov said this week that AvtoVaz could sell an additional 25% stake to a Russian metals firm, which may included Deripaska’s majority-owned United Company RusAl.

Italy’s Fiat is also seen by analysts as a favorite, having first teamed with AvtoVAZ in 1965 to build its flagship factory in Tolyatti, Russia. „Fiat has a more interesting product line,” Mikhail Pakuveren, an analyst with Moscow-based financial group IFD Kapital, was quoted by Kommersant as saying. Renault, though in long negotiations with AvtoVAZ, is a long shot demanding too much control and looking to produce cars under its own brand name, Pakuveren said. (m@c.com)