By Darya Korsunskaya
MOSCOW, Oct 2 (Reuters) - Russian Prime Minister Vladimir Putin gave an ultimatum on Friday to French carmaker Renault to either help finance troubled Russian carmaker Avtovaz or see its stake reduced.
'Either they (Renault) participate in funding the enterprise or we will have to agree with them on dividing up our stakes,' Putin told government officials.
Renault, which bought a quarter of the state-run firm for over $1 billion two years ago, declined immediate comment.
Avtovaz has said it would have to cut a quarter of its staff or 27,600 people in the largest round of job cuts in a single Russian city.
The cuts, which come amid a 44 percent decline in sales of Avtovaz's Lada, will test the ability of Putin's government to avoid unrest as sharp recession follows a decade of boom.
Avtovaz, a Soviet-era behemoth that still produces some clunky Lada models on outdated 1960s equipment, has grown used to decades of state money injections to stay afloat.
Hopes of modernisation soared when Renault bought the stake, but the crisis delayed many of Russia's restructuring plans as budget revenues fell amid the recession.
Putin visited Avtovaz six months ago to pledge $1 billion in state support to avoid what he described as the General Motors scenario, when 34,000 people were fired..
But state money was quickly spent paying off debts, and the company expects to post a net loss of over $1 billion this year.
Avtovaz's management was forced to cut working hours and wages as a last resort to avoid mass layoffs, but was forced this month to announce big job losses and requested additional state funds.
Finance Minister Alexei Kudrin said last week it was the last time the state would help AvtoVAZ, possibly by increasing its stake from the current 25 percent, but it would also demand a big restructuring.
'I don't think AvtoVAZ will die,' Kudrin said.
On Friday, First Deputy Prime Minister Igor Shuvalov asked Putin to give him two more weeks to come up with final proposals on how much funds Avtovaz needs and added it would make sense for the carmaker to cut 5,000 jobs before the end of the year.
Putin said the time had come to get Renault involved in talks.
'As far as modernisation is concerned, we need to talk to foreign partners, Renault and Nissan. We have already given Avtovaz the first tranche of 25 billion roubles and have avoided diluting their (Renault) stake,' Putin said.
The Russian state holds 25 percent in Avtovaz, brokerage Troika Dialog controls another 25 percent, while less than 25 percent is freely floated.
(Writing by Dmitry Zhdannikov, editing by Will Waterman) Keywords: PUTIN AVTOVAZ/RENAULT (+ 7 495 775 12 42, dmitri.zhdannikov@reuters.com) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
MOSCOW, Oct 2 (Reuters) - Russian Prime Minister Vladimir Putin gave an ultimatum on Friday to French carmaker Renault to either help finance troubled Russian carmaker Avtovaz or see its stake reduced.
'Either they (Renault) participate in funding the enterprise or we will have to agree with them on dividing up our stakes,' Putin told government officials.
Renault, which bought a quarter of the state-run firm for over $1 billion two years ago, declined immediate comment.
Avtovaz has said it would have to cut a quarter of its staff or 27,600 people in the largest round of job cuts in a single Russian city.
The cuts, which come amid a 44 percent decline in sales of Avtovaz's Lada, will test the ability of Putin's government to avoid unrest as sharp recession follows a decade of boom.
Avtovaz, a Soviet-era behemoth that still produces some clunky Lada models on outdated 1960s equipment, has grown used to decades of state money injections to stay afloat.
Hopes of modernisation soared when Renault bought the stake, but the crisis delayed many of Russia's restructuring plans as budget revenues fell amid the recession.
Putin visited Avtovaz six months ago to pledge $1 billion in state support to avoid what he described as the General Motors scenario, when 34,000 people were fired..
But state money was quickly spent paying off debts, and the company expects to post a net loss of over $1 billion this year.
Avtovaz's management was forced to cut working hours and wages as a last resort to avoid mass layoffs, but was forced this month to announce big job losses and requested additional state funds.
Finance Minister Alexei Kudrin said last week it was the last time the state would help AvtoVAZ, possibly by increasing its stake from the current 25 percent, but it would also demand a big restructuring.
'I don't think AvtoVAZ will die,' Kudrin said.
On Friday, First Deputy Prime Minister Igor Shuvalov asked Putin to give him two more weeks to come up with final proposals on how much funds Avtovaz needs and added it would make sense for the carmaker to cut 5,000 jobs before the end of the year.
Putin said the time had come to get Renault involved in talks.
'As far as modernisation is concerned, we need to talk to foreign partners, Renault and Nissan. We have already given Avtovaz the first tranche of 25 billion roubles and have avoided diluting their (Renault) stake,' Putin said.
The Russian state holds 25 percent in Avtovaz, brokerage Troika Dialog controls another 25 percent, while less than 25 percent is freely floated.
(Writing by Dmitry Zhdannikov, editing by Will Waterman) Keywords: PUTIN AVTOVAZ/RENAULT (+ 7 495 775 12 42, dmitri.zhdannikov@reuters.com) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
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