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GM Talks with Russian GAZ about Tie-Up

Reuters
Tuesday, 11 Dec 2007 | 4:45 AM ET

General Motors has had talks with Russia's GAZ about a possible tie-up that would give the No. 1 U.S. automaker more production capacity in the booming Russian market, GM Chief Executive Rick Wagoner said Monday.

"We've talked to them from time to time and we're going to keep our eyes on options which help us get a better position in Russia," Wagoner told reporters.

The comments from the top GM executive came just two days after GM lost out on a bid for a stake in Russia's AvtoVaz to French rival Renault.

In a setback to GM, Renault announced Saturday that it had struck a deal to buy a 25 percent stake in AvtoVaz, Russia's largest car maker.

Wagoner, who was attending a year-end reception hosted by the Detroit-based automaker, said GM expected continued strong growth in Russia and was struggling to keep up with demand for its vehicles there.

"We are interested in trying to find ways to grow our position in Russia, where we have moved from almost nowhere to No. 1 among the non-Russians," Wagoner said. "We're just figuring out ways to try to grow our presence there. It looks like the market has legs."

Joint Venture Talks

Russia's No. 2 automaker, GAZ, is controlled by tycoon Oleg Deripaska. It makes a range of vehicles, including sedans, trucks and buses.

A senior GAZ executive was quoted earlier Monday by the Financial Times as saying that the Russian company was in discussions on a joint-venture for passenger car production with both GM and privately held Chrysler.

GM Chief Financial Officer Fritz Henderson, who also spoke to reporters, said GM's sales in Russia, particularly for its Opel brand, were running ahead of expectations.

But transport costs and import duties as high as 25 percent for the Russian market cut into GM's profit margins in Europe in the past quarter, he said.

"We're doing more volume in Russia, particularly with Opel product than we initially anticipated, so we're looking at the options that we have to get more localized more quickly with Opel product in Russia," Henderson said.

Analysts expect the Russian vehicle market to overtake Germany as Europe's largest in the next several years.

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