4887 words 20 pagesIntroduction
GM and Avto VAZ were sitting down to finally negotiate a deal that they had originally committed to in 1999, to jointly build and sell Chevrolets in the Russian market. This car market was expected to account for a significant share of global growth over the next decade. GM felt pressure to jump on board or miss the opportunity. Other auto makers were already on the move. Ford, Fiat and Daewoo were already exploring their own opportunities in Russian and GM did not want to be left out in the cold. However, things were not going to be easy due to a weak economy, turbulent car market, legal problems of Avto VAZ related to tax evasion, the fact that Avto VAS was horribly inefficient at building cars, and a divided showing …show more content…
In 1994 the Russian government began privatizing many state-owned companies including Avto VAZ and Berezovsky, involved in the formation of AVVA, quickly acquired 32.25% of the shares available. By 2000, Berezovsky supposedly had no formal relations with AVVA, but many believed he still maintained informal influence on their decisions. In 2000 AVVA announced that it was changing it’s charter from an investment fund to a holding company much to the anxiety of the auto analysts. They feared that they were poising themselves to take control of Avto VAZ which now had broken out into several smaller divisions.
This came right on the tail of GAZ, the second largest automaker in Russia being caught in a hostile takeover. SibAl (Sibrinski Alyumini) started accumulating shares in GAZ and once that took place they had veto power. The problem was that no one knew how many shares they actually held. Not even GAZ themselves. Their regulations only required the disclosure of ownership of 5% shares or more. Only direct investors named and those people were generally acting as agents on the behalf of the owners and that resulted in them naming groups of owners. The fact was that in Russia it was really unclear who owned what so they could not disprove SibAl’s “claim” that they held 25% ownership in their company so…they gave in.
Rumors arose that Avto VAZ would fall next but many felt that it was highly unlikely that