Russian firm Avtovaz could go bankrupt if it can’t agree a restructuring deal with banks, according to a financial executive from the company.
Oleg Lobanov, the firm’s executive vice president for finance, said it needed support from banks as it wouldn’t be able to pay off its vast debts through selling its products, which include Lada cars.
“Our production plan does not allow us to generate sufficient funds to service our existing debt and pay interest,” he said. “If the other options don't succeed, then we have no other choice.”
In June, the firm, which is 25 per cent owned by Renault, had debts owed in taxes and to suppliers of around £2.2billion. The company has been hard hit by the recession and the fall in demand for new cars in Russia. It has had to cut 27,600 jobs to save money.
Renault CEO Carlos Ghson says his firm is ready to help Avtovaz overcome its troubles.
“We are ready to support Avtovaz,” he said. We are supporting them with management and with technology. I am confident that AvtoVAZ will be able to overcome its troubles in the short term and the medium term.”