Renault in talks to sell its Russian operations for one ruble

PARIS—French automaker Renault HER

RNO 1.02%

is in talks with the Russian government over selling its 68% stake in Russia’s largest automaker to a state-backed entity, according to a report in Russian state media.

The French automaker is expected to sell its stake in AvtoVAZ for the symbolic sum of one ruble to NAMI, a state-backed automotive research and development center, Russian Industry Minister Denis Manturov has said, quoted by the Russian news agency Ria Novosti. .

The French automaker would have the option to buy out its stake in five to six years as part of a potential deal, Mr Manturov said, according to Ria Novosti. Mr Manturov also said that the Renault plant in central Moscow, which manufactures vehicles under the Renault and Nissan brands, will be transferred to the city government, according to Ria Novosti.

Mr. Manturov’s office did not respond to a request for comment.

Last month, Renault said it was evaluating options on its stake in AvtoVAZ and planned to write off the value of its Russian operations, which were valued at 2.2 billion euros, or around $2.4 billion. , at the end of last year.

Renault and other Western companies have been under pressure to disengage from Russia since its full-scale invasion of Ukraine began in late February, triggering waves of Western sanctions aimed at cutting Moscow off from the global financial system. The sanctions have crippled supply chains, making it difficult for foreign companies to operate in Russia while depriving them of any Western buyers for their Russian assets.

Renault’s deep roots in Russia make it a red flag for other Western companies exploring options on how to leave the country. Renault has invested billions of euros in Russia and held a nearly 30% market share there last year. It also employs some 40,000 people in the country.

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Russia’s lower house of parliament, the State Duma, is considering legislation that would allow Russia to nationalize the assets of foreign companies that left the country in response to its invasion of Ukraine. The ruling United Russia party, which proposed the legislation, said it was aimed at preventing bankruptcies and preserving jobs. Russian President Vladimir Putin endorsed the proposal.

Renault’s buyout options will be priced based on the amount of money invested in AvtoVAZ while it is under NAMI management, Mr Manturov said, according to Ria Novosti, adding: “There will be no freebies. here.”

At the start of the war, Renault initially tried to maintain operations in Russia while exploring ways to leave the country, according to people familiar with the matter. The company tried to reorganize its supply chain to replace parts that were missing from its factories because of the sanctions and the war in Ukraine, these people said.

However, as the war continued, Renault’s operations in Russia began to deplete their cash reserves. The automaker had to continue paying wages and suppliers as sales and production declined.

Since then, the AvtoVAZ plant has been operating at a much reduced capacity, as Western sanctions and the global chip shortage have deprived it of essential parts. The Renault plant in Moscow, meanwhile, reopened for a few days last month to liquidate the stock of parts it had on hand, but has since been closed for weeks.

Stellantis STLA 1.61%

NV, maker of the Jeep and Peugeot brands, suspended operations in Russia last week, citing a “rapid increase in cross sanctions and logistical difficulties”.

NAMI is a Moscow-based automobile development and research center, founded in 1918 after the Bolshevik Revolution. The group is a co-owner of Aurus, a Russian car company launched in 2018 that aims to produce luxury vehicles. That year, Mr Putin drove through Moscow in an Aurus car on the day of his inauguration for a fourth term.

Russian public conglomerate Rostec Corp. owns the remaining 32% of AvtoVAZ. Its CEO, Sergei Chemezov, has been under Western sanctions for years following Russia’s annexation of Crimea.

AvtoVAZ produces Lada, the only Russian brand with a significant market share, accounting for 21% of auto sales in Russia last year. The company was founded in 1966 when the Soviet Union built a gigantic factory on the banks of the Volga and renamed the city that grew up around it in honor of Palmiro Togliatti, the leader of the Party Italian communist at the time. The factory spanned 1,000 acres, more than New York’s Central Park.

Write to Nick Kostov at [email protected]

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