BUSINESS

AvtoVAZ Goes Brazilian To Secure New Engine Supplies

By Anna Smolchenko

Staff Writer

MOSCOW — State official and AvtoVAZ board member Boris Alyoshin is set to visit an engine plant in Brazil in April, with a view to buying the plant for the country’s largest carmaker, a government spokeswoman said Friday.

The visit comes as AvtoVAZ embarks on a multibillion-dollar restructuring program, under which it plans to launch a dozen new models in the next five years. Securing a new engine supply is part of that plan.

During the visit to Brazil planned for April 2-7, Alyoshin, head of the Federal Industry Agency, will visit gasoline engine manufacturer Tritec Motors, an agency spokeswoman said. “AvtoVAZ is considering the purchase of the plant,” she said.

Tritec, which is located in Campo Largo in the southern Brazilian state of Parana, is jointly owned by BMW and DaimlerChrysler.

The confirmation comes after Kommersant reported Alyoshin would accompany Prime Minister Mikhail Fradkov to Brazil early next month. The report said the plant was worth up to $1.5 billion.

An AvtoVAZ spokesman said he was unaware of the purchase plan.

The 42,000-square-meter plant currently produces 1.6-liter gasoline engines mainly for BMW’s Mini car.

Last year, BMW said it planned to build the next-generation engine for its new version of the Mini at a Peugeot Citroen plant in Douvrin, France. It has not yet decided what it will do with the Brazilian plant.

“Both partners are jointly assessing various options,” BMW spokesman Marc Hassinger said on Friday from Munich. Hassinger declined to say whether selling the plant was a possibility.

The plant’s annual capacity is around 250,000 engines, he said.

Securing new engines for AvtoVAZ was one of the points in a plan for the car industry drawn up last year by the Federal Industry Agency, which is part of the Industry and Energy Ministry. The plan, which called for $5 billion in state funds for AvtoVAZ, said the Russian car industry needed two new types of 1.1-liter to 2.2-liter gas engines and a new type of 1.8-liter to 2.2-liter diesel engine.

Gairat Salimov, an automotive analyst with Troika Dialog, said purchasing an engine plant would make sense because it was quicker and simpler for AvtoVAZ than building its own plant from scratch.

But, he said, the catch will be in getting the plant’s previous owner to leave behind any cutting-edge technology used in engine production.

Both Salimov and Kirill Chuiko, a car analyst with UralSib, pegged the engine maker’s value at under $500 million.

While the plant produces gasoline engines only, Tritec spokesman Thomas Prete said Friday that he did not “exclude the possibility of marketing diesel engines” in the future.

Last week, automotive firm GAZ said it was interested in buying a foreign diesel engine maker, adding it would consider purchasing jointly with AvtoVAZ.

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