Putin bails out Avtovaz with 20 billion rouble package

Apr 3rd, 2009 | By | Category: Rouble News

Avtovaz, the Russian car manufacturer that makes the infamous Lada brand vehicles has been bailed out with a 20 billion rouble rescue package from Prime Minister Vladimir Putin.

The carmaker owes its creditors a total of 44 billion roubles, and therefore the rescue package barely scratches the surface of the company’s financial woes. Putin has assured workers at the Lada factories that their job are secure and shares have increased 30% on the news of the bail out, but many fear this response may be short sighted.

The Lada’s reputation at home and internationally is very poor. The cars are well known for their substandard quality and their archaic designs. Their popularity in Russia is depleting fast, with only 20% of all cars sold in Russia being Ladas, compared to 70% at the beginning of the decade. Sales of Ladas shrank by 6% last year, while the car industry, as a whole, grew by 15%.

Anger is spreading that tax payers’ money has been used to bail out the struggling firm, which seems to be in need of something far more radical than a quick fix. One industry expert says that the major restructuring and reevaluation needed at Lada will not happen if the government continues to bill the firm out.

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