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Russian PM Putin reportedly tells Renault to put up or get out
It seemed like a good idea at the time, but with hindsight being 20-20, how many failed ventures can be summed up by that same excuse? Just last year, Russia was looking to foreign investors as one of the most promising emerging markets in the world. Renault got locked into a bidding war with Fiat and General Motors for a large stake in Autovaz, Russia's largest automaker, known to consumers for producing Lada.
Renault won and paid $1 billion for the 25% stake. But one year and one giant global economic meltdown later, that victory is looking more like a liability – the quarter interest is now worth less than a quarter of what Carlos Ghosn and company paid for it. And now Renault is expected to bail Autovaz out of its troubles or else face the wrath of one Vladimir Putin.
The autocratic Russian prime minister, whose government both owns another quarter of Autovaz on the one hand and has extended significant loans to it on the other, has reportedly demanded that Renault cough up some serious dough – $850 million, to be exact – in "emergency loans" to keep the Russian automaker solvent following a nosedive in the domestic market that saw sales plummet a whopping 50 percent and its workforce subsequently cut by a fifth.
Putin is reportedly threatening to further dilute Renault's stake in Autovaz if they don't comply, but while Ghosn has pledged to establish a new joint venture between the two together with sister company Nissan, the cash has yet to flow. With the prospect of folding to Putin's demands threatening to weaken Renault's image in the Russian market and around the world, it seems to be a lose-lose situation.
[Source: Financial Post | Image: Dmitry Astakhov/AFP/Getty]
Reader Comments (Page 1 of 2)
Jordan 5:35PM (10/26/2009)
Mr. Bean is that you?
Reply
Nick 9:34PM (10/26/2009)
Never trust Russians, never do business with Russians.
These are some of the world's worst crooks, nearly every one of them, corrupt to the bone, shady to the bone.
Renault should get the hell out of Russia.
vor 5:18AM (10/27/2009)
Nothing like Generalising a whole people! Europeans do the same thing! I mean Angel Merkels government telling GM basically what to do with Opel. Obama pretty much taking over GM.
Russians and Arabs seem to be the only people left that you can pretty much say any racist, bigoted comment about and get away with it. GFYS
miles 9:05AM (10/27/2009)
funny your name is Vor. Means "thief" in Russian, yes?
Geo 5:45PM (10/26/2009)
I think Renault should just swallow the losses and run away as fast and as far away as possible and do that as soon as possible. Cut the rope and run, run people! Nothing works there, nothing worked before, nothing will. Sell whatever you can to whomever can pay anything and run!
Reply
adrian 5:52PM (10/26/2009)
Renault should just bail and tell Putin sorry mate but that's just the way it goes. Times are tough.
Motor_Yakuza 6:01PM (10/26/2009)
Yeah, and then the ex-KGB Putin will show Renault how tougher can get for them.
adrian 7:27AM (10/27/2009)
@Motor Yakuza
It won't be good for Russia if Putin makes life difficult for companies like Renault when times are tough. Other companies will just stay away and Russia needs foreign investment like any other country no matter how powerful they are.
The BP-TNK oil parnership and the problems with it was a warning to western companies to stay away from this mine field of a country.
Matt 5:49PM (10/26/2009)
Yet another company gets screwed by Putin...
Yeh Russia is a huge market with lots of growth opportunities but its got to be in the back of your mind that the guy in charge will screw you over in the end
Reply
James 5:52PM (10/26/2009)
"Putin is reportedly threatening to further dilute Renault's stake in Autovaz if they don't comply.."
In Russia...Putin dilutes you.
Motor_Yakuza 5:59PM (10/26/2009)
You mean the Czar Putin? Well expect the same thing from Obama sooner or later.
Reply
Shiftright 8:18PM (10/26/2009)
So lame...There's no way you can even begin to compare the two countries and the ideologies of both leaders...
Tohe 10:24PM (10/26/2009)
You don't even deserve that half star you got left.
socarboy99 6:06PM (10/26/2009)
Let this be an example and/or lesson to any western hemisphere based
company that wants to invest or do business in Russia or China. The
lesson of this story is that the communist governments of these countrys
"play by their own rules". They will either take your money (like this example)
or take your technology (like the Chinese). Any company that does business
with either country should "watch their back" at all times!
Reply
Big Mola 6:10PM (10/26/2009)
Play with the devil--Get burned.
Rich 6:44PM (10/26/2009)
Yup. Just like any technology company in the Western world will take your ideas and run with them, then once they've registered faulty patents on them, slap a huge lawsuit on you for "recovery of losses".
tomguptill 7:11PM (10/26/2009)
Putin's Russia may be many things, but communist is not one of them.
Kelv00n 7:38PM (10/26/2009)
Dude, do you know what "communist" means? Forget what Putin and the fat bastards in Beijing say, China and Russia are only "communist" by name nowadays. Actually, Russia doesn't even bother to pretend any longer. As for China, it is arguably the fastest-growing capitalist country in the world today. Politically, it may look communist, but in reality...well, just ask the poor Joe who built your cheapo walmart toaster.
Besides, unless Carlos Ghosn wants radioactive isotopes to go along with his tuna sandwich, he better not mess with the Putin. That guy once aired commercials praising himself while hot chicks danced to Russian techno music. You don't mess with someone like that.
socarboy99 8:32PM (10/26/2009)
Kelv00n,
you might call economic advances in either China or Russia what
you want, but no matter how you slice it, these countries ARE communist.
Their governments have absolute control of the lives of their citizens. The
word "communism" might be down played now but call a spade a spade.
You even acknowledged this by saying "better not mess with Putin" and how
the man did a public spot with his people to make him look good. I don't know
where you're from (if you're lucky a democracy) try going to Russia or
China and speaking your mind...let me know how that goes off for you!
Soccer Mom 8:52PM (10/26/2009)
Communists? Dude, you need to revisit the 5th grade curriculum before making geopolitical statements.