Renault to support AvtoVAZ shake-up

PARIS (Reuters) - Renault is backing near-bankrupt Russian car-maker AvtoVAZ (AVAZ.MM) with financial support for a shake-up, but has refused Russian demands for a big cash injection, Chief Operating Officer Patrick Pelata said.

"They would love us to pour in lots of money because AvtoVAZ needs money but we don't have a lot of money -- We told them we cannot put more money in the joint venture," Pelata said at the Reuters Autos Summit on Monday.

AvtoVAZ racked up first half losses of 19.4 billion roubles ($668 million) -- nearly 10 times more than the previous year -- as Russian demand for cars collapsed when the crisis hit. Russian car sales fell 52 percent in September.

Pelata said there was still a "big question mark" over the outlook for the Russian market.

Renault (RENA.PA) is backing a shake-up of the AvtoVAZ supply base and assembly platforms with an undisclosed financial sum, Pelata said, adding to the 650 million euros ($958.1 million) it spent on a 25 percent stake in the Lada maker in the winter of 2007/08.

"We're going to pay our share... It's not small money but it's not half a billion," he said, adding discussions were also underway to build Renault and Japanese partner Nissan (7201.T) cars at the AvtoVAZ plant in Togliatti, Russia, as well as Ladas.

Separately, Christian Esteve, leader of Renault's Eurasia management committee, told a news conference in Paris that the group aimed to keep its AvtoVAZ stake at 25 percent.

Esteve added that a joint production platform for AvtoVAZ, Renault, and Nissan was being considered.

Esteve confirmed that an initial meeting with the Russian government would take place on November 10 to discuss a "viable plan" for AvtoVAZ.

"We have set out a business plan and a product plan for AvtoVAZ. Using this plan, we have started to work out the financial needs of the group and to negotiate with the Russian government," he said, adding that he expected negotiations to last until around June 2010.

"The Russian administration would like to finish before Christmas -- that seems difficult to me," he said.

AvtoVAZ was "not a hopeless case," Esteve said, but he added that given the large-scale crisis the Russian automobile industry had suffered, AvtoVAZ could not come through it without significant restructuring.

Pelata said that in the longer run, the Russian investment would pan out well for the alliance.

"Russia needs a strong Russian brand and that is Lada," he said, adding in the future Renault/Nissan and AvtoVAZ could have a market share of over 30 percent on what will become Europe's biggest car market as the mobility and purchasing power of Russians is set to increase.

"There will be bumps on this road, but we are sure that this was a route we had to take," he said.

($1=29.04 Rouble)

($1=.6784 Euro)

(Additional reporting by Marie Mawad in Paris; Writing by John Bowker in Moscow; Editing by Hans Peters and Marcel Michelson)