Russian car maker halts production over financial crisis

A Russian car maker is to freeze production indefinitely after the company failed to sell its factory to the country's largest auto maker, AvtoVAZ, a leading business daily said on Wednesday.
   The SOK Group, IzhAvto's parent company, has refused to comment, however, an insider told Kommersant that over 5,000 of IzhAvto's 5,500 employees face losing their jobs.
   Sources close to the group said the plant had "lost interest in assembling cars" amid the falling car market and ruble devaluation and production had became unprofitable, following a refusal by South Korea's car giant Kia to lower the price of its vehicle assembly units.
   The daily has learned that the plant's losses had reached $7 million since November.
   IzhAvto faces bankruptcy over the halt in production, a source in a lending bank told Kommersant. He said the plant owed some 12 billion rubles ($354 million), including an 8-billion ruble ($236 million) loan from Russia's largest bank Sberbank.
   Boris Alyoshin, who heads AvtoVAZ, also cited a failure by the company to negotiate a price cut in the Kia assembly units as a reason for backing out of the IzhAvto purchase.
   The Udmurtian authorities admitted they were powerless to influence the production halt at the plant, according to the president of the Urals republic, Alexander Volkov.
   The IzhAvto plant has the capacity to produce around 220,000 cars and in 2007 some 78,800 vehicles rolled off its assembly lines, including Izh-27175 and VAZ-2104 cars, along with Kia Spectra and Sorento models.

"Alliance Media" News Agency, based on the story by RIA Novosti