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UPDATE 2-Russia's AvtoVAZ loss widens in H1, sales halve

Published 10/12/2009, 09:35 AM
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* Posts 19.4 bln rouble net loss vs 1.9 bln loss in H1 '08

* Revenue falls 46 percent to 53.1 bln roubles

* Lada sales more than halve

* Creditor banks could take stake -- deputy finmin

* Shares down 2 percent, against rising market

(Adds details, deputy finance minister, background)

By Yulia Komleva

MOSCOW, Oct 12 (Reuters) - Indebted Russian carmaker AvtoVAZ , which this month admitted to making poor quality cars, suffered a tenfold increase in net losses during the first six months of the year as sales halved of its Lada model. Russia's largest carmaker lost 19.4 billion roubles ($655.4 million) in the first half of 2009 and is banking on another round of support from the state and its 25 percent shareholder Renault to keep its Soviet-era plant running.

Its Moscow-traded shares fell more than 2 percent on a day when the wider market rose.

"A decline in sales and car production volumes has led to significant losses," AvtoVAZ said in a statement on Monday. Its net loss in the first half of 2008 was 1.9 billion roubles.

AvtoVAZ plans to cut more than 27,000 jobs, or a quarter of its workforce, to cope with plummeting car sales during Russia's first recession in a decade.

In a presentation for the government obtained by Reuters last week, AvtoVAZ said it had asked the state for an additional 70 billion roubles ($2.4 billion) and admitted it was making cars of poor quality, blaming this on suppliers.

AvtoVAZ said revenue almost halved to 53.1 billion roubles in the first half of 2009 from 98.5 billion a year ago, calculated under International Financial Reporting Standards.

The company sold 169,000 Lada cars in the six months to the end of June, compared with 378,000 in the same year-ago period.

Car sales in Russia as a whole fell 52 percent year-on-year in September. Before the crisis, Russia had been forecast to overtake Germany as Europe's biggest car market.

STATE SUPPORT

Russia's government, wary of simmering unrest in one-factory towns hit by the financial crisis, has made social stability a priority in places such as Togliatti, the city on the Volga river built to serve the AvtoVAZ car plant.

The job cuts planned by AvtoVAZ would be the largest round of redundancies in a single Russian city since the crisis began.

AvtoVAZ said that, as of June 30, its total debt stood at 59.9 billion roubles, including 58.2 billion short-term debt. Short-term liabilities, which also include money owed to suppliers and taxes due, amounted to 105.5 billion roubles.

Renault, which pain $1 billion for its 25 percent stake, is prepared to invest more, though not necessarily in cash. Developing models on AvtoVAZ production lines to replace outdated cars was one of several possible options, a Renault spokeswoman said on Oct. 6.

Deputy Finance Minister Alexander Novak said on Monday another option to rescue the company would be for state-owned creditors Sberbank and VTB to exchange their debts for a stake in the company.

A decision on this could be taken by the end of the month, Novak said.

By 1325 GMT, shares in AvtoVAZ were down 2.1 percent at 16.52 roubles, against a rise of 3 percent on the broader MICEX index. (Writing by Maria Kiselyova and Robin Paxton; Editing by David Holmes) ($1=29.60 Rouble)

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