Moscow, 4 December 1996 (RFE/RL) - Russia's largest automaker, Avtovaz, has accepted a government plan of partial privatization to pay off debts and avoid bankruptcy proceedings. The plan calls for a sale of 50 percent of the company's shares. But analysts doubt that an investor can be found to rescue the ailing company.
First Deputy Prime Minister Vladimir Potanin announced the agreement at a news conference last night following talks with Avtovaz chairman Vladimir Kadannikov, the head of the Federal Bankruptcy agency Petr Mostovoy and Konstantin Titov, the governor of the Samara region where the company is based.
Potanin said shares in Avtovaz could be sold in three to four months, either to a single strategic investor or a group of investors. He mentioned BMW, General Motors' Opel and Ford as possible foreign investors.
Avtovaz has debts totaling roughly $2 billion, including about $500 million in tax arrears to the federal government. Potanin said revenues from the sale would not cover all the company's debts and that the government would have to restructure any outstanding tax obligations.
The Russian government last week threatened to initiate bankruptcy proceedings against Avtovaz, charging that the company's management had refused an offer to sell 50 percent of the stock to a strategic investor in exchange for debt-rescheduling.
Avtovaz's chairman Kadannikov accused the government of trying to undermine "one of the few companies that are still functioning." He said the bankruptcy proceedings were in fact a masked attempt to hand over the company to what he called "a few existing clans."
Kadannikov did not name names, but media reports have speculated that Boris Berezovsky, deputy secretary of the Security Council, might benefit from the deal. Berezovsky has reportedly made enormous profits from Logovaz, a large car dealership which sells Avtovaz's Lada, Russia's best selling car.
Speculation has also centered on Oneksimbank, which Potanin headed before taking up his post as first deputy prime minister. Potanin denied these reports.
The Russian media have portrayed the dispute over Avtovaz as a political struggle between Potanin and Kadannikov, who was Potanin's predecessor as first deputy prime minister.
But Finance Minister Aleksandr Livshits denied in an exclusive interview with Radio Liberty over the weekend that the threat of bankruptcy was an attack on Kadannikov. He said the problem was simply that Avtovaz was deeply in debt and had to pay up.
It is unclear why the Avtovaz management finally agreed to the government's sale plan. But Samara's governor, Konstantin Titov, might have given some clues when he said yesterday in an interview with the Interfax news agency that Avtovaz's current management was likely to retain control even after the sale. He said that the shares would not go to one single investor which could gain control over the company.
"There is no such strategic investor that could invest $2 billion to buy all the shares in one packet."
Other observers agreed. They expressed doubt that a single investor or group of investors would come forward to bail out Avtovaz in light of both the political and economic risks. Previous efforts to sell a stake in the company to a foreign buyer have failed.
Duma deputy Sergei Ivanenka, a member of the reformist Yabloko faction, told RFE/RL that the decision to sell Avtovaz shares is a positive step for the cash-strapped budget. But he said it will be hard to find an investor willing to put up so much money when they know it will go towards paying off state and other debts instead of towards revamping the company.
Gavin Rankin, head of research at the Moscow-based brokerage firm Troika Dialog, told RFE/RL that the giant company needs "enormous restructuring" and new management in order to be made attractive to investors.
"No foreign company would buy Avtovaz in its current state," he said.