TOGLIATTI, October 19 (RIA Novosti) - Russia's largest car producer, AvtoVAZ, said on Monday it may have to file for bankruptcy due to losses and spiraling debts, but that production will not be halted.
Executive vice-president Oleg Lobanov told reporters: "In such an event, we are talking not about a halt in production, but of certain legal procedures that would give a certain time lag to solve the issue of debt restructuring."
The company, known for its Lada brand, is expected to accumulate 75.2 billion rubles ($2.6 billion) in debt by the end of 2009.
AvtoVAZ, which dominates the economy of the Volga city of Togliatti, earlier announced plans to cut its 100,000-strong workforce by over 25%.
As of October 1, 2009, Avtovaz's principal debt, including a 25 billion-ruble ($850-million) loan granted to state corporation Russian Technology, the holder of a blocking stake in the auto giant, stood at 62 billion rubles ($2.1 billion), Lobanov said.
He said AvtoVAZ is currently considering several options for debt restructuring. The simplest is protection against creditors, which is a realistic solution if the options of convertible bonds issue or direct talks with creditors cannot be realized.
The bonds option envisages the issue of convertible bonds worth 50 billion rubles ($1.7 billion) that could be purchased by Russian state-run national development bank Vnesheconombank and later swapped for the car giant's shares.
The bonds placement "allows us to refinance current debts within the shortest time possible, end interest payment, and receive the cash required to solve liquidity problems that are easily projected over the next two years," Lobanov said.
Meanwhile, Grigory Khvorostyanov, AvtoVAZ vice-president for strategy, said that the car giant expects to break even in its operations by expanding the production of cars based on one platform.
"Our task is to reduce the number of platforms, and focus on one or two of our own platforms and assimilate Renault technologies, assist in creating our own components base, and bring the structure of the Russian auto industry in compliance with world standards," he said.
AvtoVAZ, in which Renault holds a blocking stake, has production capacity of over 800,000 vehicles annually. It has made more than 25 million Lada cars since it was established in 1970 as a joint project with Italian carmaker Fiat. The company currently produces 15 models priced between 150,000 rubles ($4,800) and 350,000 rubles ($11,240).
