Putin Vows To Help Russia's Carmakers

Prime Minister Vladimir Putin pledged ‘all-possible assistance’ for Russia's struggling auto industry, while praising role played by foreign carmakers operating in the country.

KALUGA, Russia (AP) -- Prime Minister Vladimir Putin on Tuesday pledged "all-possible assistance" for Russia's struggling auto industry, while praising the role played by foreign carmakers operating in the country.

Putin spoke during a visit to Volkswagen's two-year-old plant in Russia, where the German carmaker has continued to expand production despite a dramatic fall in new car sales.

Before the global financial crisis hit last year, Russia's car market was on its way to becoming Europe's largest, and foreign makers rushed in to set up plants. In 2009, however, new car sales shrank by more than 50 percent in the first three quarters of the year.

"There is no question we have suffered a lot because of the crisis," Volkswagen chief executive Martin Winterkorn said. "But one thing is clear: Russia is on the way to becoming a leading global car market."

Volkswagen's plant in Kaluga, about 100 miles (about 170 kilometers) south of Moscow, has produced 103,000 vehicles this year and plans to increase annual production to 150,000 next year. The workforce is expected to grow from 1,800 to 3,000 next year, the company said.

These projections put Volkswagen one year behind the schedule announced when production began in November 2007.

Putin affirmed the government's support for what he called "traditional" carmakers, a reference largely to AvtoVAZ, Russia's outdated and inefficient automotive giant.

"They play a huge role in our economy, guaranteeing employment in dozens of cities and whole regions," he said. "They are able, I have no doubt, to cope with the current problems, to carry out modernization of production, to put out competitive products and cars that will be in demand."

AvtoVAZ is heavily indebted and has announced plans to lay off a quarter of its 102,000 workers. Production has been severely slashed.

The government lent AvtoVAZ 25 billion rubles (about $850 million), most of which the company spent to pay off suppliers. One of Putin's deputies said earlier this month that the government is prepared to lend 12 billion rubles more. Putin gave no specifics Tuesday.

Russia also considers the foreign plants to be an integral part of its car industry, Putin said, as he expressed hope that Volkswagen would help meet Russia's need for modern and affordable cars.

He made a point of noting that Volkswagen was among the sponsors not only for the 2014 Winter Olympics in Sochi but for Russia's national football team.

In addition to the 18 Volkswagen and Skoda models now assembled in Russia, Volkswagen is developing a new model designed specifically for the Russian market, Vladimir Schultz, who heads the department of localization and technical development at the Kaluga plant, told reporters.

The new model, which has not been named, is based on the Volkswagen Polo and will sell for under euro10,000, Schultz said.

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