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NINETY EIGHT REGENCY

Kia, Hyundai in talks with Russian carmaker IzhAvto

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Kia, Hyundai in talks with Russian carmaker IzhAvto

September 6, 2010 06:01 CET

MOSCOW (Reuters) -- South Korean automakers Kia Motors Corp. and Hyundai Motor Co. are in talks with IzhAvto on the assembly of cars at the distressed Russian company's plant.

IzhAvto's plant, which has an annual capacity of about 220,000 cars, came to a standstill at the start of last year amid Russia's worst economic downturn in a decade. The company has debts of some 14.5 billion rubles ($498.1 million) and is undergoing a bankruptcy procedure.

IzhAvto's plant, which before the demise of the Soviet Union made cars under the Izh brand, is located in the city of Izhevsk. It also home of weapons maker Mikhail Kalashnikov whose AK-47 assault rifles are made there.

United Auto Group, which acts as an agent of Russan state lender Sberbank, which holds about half of IzhAvto's debt, is driving the project with the Korean firms, aiming to assemble 60,000 vehicles a year.

The group's head, Igor Kulgan, said the plant could assemble 45,000 Kia cars and 15,000 Hyundai light commercial vehicles. Sberbank will finance the project.

Russian government spokesman Dmitry Peskov said: "We are hoping that the talks will be successful and all the terms including one on location will be agreed."

Russia has successfully lured leading global automakers through a mixture of protectionist measures and incentives to open local assembly lines.

Russia's biggest carmaker, AvtoVAZ, also wants to make up to 90,000 of its outdated Lada models at IzhAvto, to free up capacity at its main plant in Togliatti for making more modern cars.

Russian new-car sales for the first seven months of this year are up 9 percent on 2009 to 963,688, although this is still 45 percent below 2008 levels.

Read more: http://www.autonews.com/apps/pbcs.dll/article?AID=/20100906/ANE/309039976/1198#ixzz0ynNEET68

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