April 27, 2018 / 3:51 PM / 5 months ago

FOCUS-U.S. sanctions risk hurting Russian van maker GAZ -sources

* Sanctioned tycoon Deripaska is GAZ co-owner

* GAZ added to U.S. sanctions list in April

* Joint ventures with German car makers now at risk

* Imports of foreign components could also be cut off

By Gleb Stolyarov

NIZHNY NOVGOROD, Russia, April 27 (Reuters) - Russia's biggest van manufacturer, GAZ Group, risks losing contracts with Western partners and vital supplies of foreign parts because of new U.S. sanctions, two sources familiar with the matter told Reuters.

Washington imposed sweeping sanctions on some of Russia's biggest companies and businessmen on April 6, striking at allies of President Vladimir Putin to punish Moscow for its alleged meddling in the 2016 U.S. presidential election and other so-called malign activities.

GAZ and its co-owner, tycoon Oleg Deripaska, were both sanctioned and the measures could also affect German carmakers Volkswagen and Daimler as well as U.S. firm Cummins, which all have contracts with GAZ.

GAZ, which competes with a joint venture between Ford and its Russian partner Sollers among others, sold 58,617 light commercial vehicles (LCVs) - vans and minibuses - last year. Most sales were in Russia and the former Soviet Union, making it less dependent on dollar sales.

But two sources with knowledge of the matter said the company's access to foreign components and contracts with major Western car makers, including the joint venture with Volkswagen, were now on the line.

"The situation is rather complicated," said one of the sources, who declined to be named because of the sensitivity of the situation.

"All foreign currency transactions are now in question, all contacts with partners that are somehow connected to the United States, as well as Volkswagen and Skoda production, are in question," the source said.

A GAZ spokeswoman said: "We are in constant and constructive dialogue with our partners and are working on solving the current tasks."

A Daimler representative in Russia said it was evaluating the possible impact of U.S. sanctions on its business.

A spokesman for Volkswagen in Russia declined to comment.

PRESSURE ON SUPPLIERS

Based in Nizhny Novgorod on the Volga river some 400 km (245 miles) from Moscow, GAZ employs more than 40,000 people and accounts for about 15 percent of the region's economy.

GAZ's market value has fallen by a third, or $360 million, since April 6, less significant so far than the fallout for some of Deripaska's companies such as aluminium giant Rusal , whose share price has plummeted almost 60 percent.

GAZ has a contract with Volkswagen to produce its VW and Skoda cars in Russia, as well as a similar arrangement to manufacture Mercedes LCVs for Germany's Daimler.

Sources told Reuters in December that Volkswagen was in talks to buy a stake in GAZ. It is not clear whether those talks have been affected by the sanctions but Volkswagen has already said it is concerned the U.S. measures could hurt its business with GAZ.

The sanctions on GAZ could also cause a problem for the Kremlin if there is any fallout for the company's workers, many of whom cheered Putin when he announced his re-election campaign at the company's Nizhny Novgorod plant in December.

One of the sources said senior managers at GAZ feared that production could be suspended as early as June due to a shortage of components from Germany, the Czech Republic, Austria and other countries because of the sanctions.

AMERICAN ENGINES

Some of GAZ's vehicles are fitted with engines made by U.S. company Cummins at its joint venture in China. When asked about the situation with GAZ, Cummins said both companies were assessing the situation.

There is also concern some of GAZ's Russian suppliers that have Western shareholders could stop working with the company but continue supplying its competitors, the source said. He did not name the suppliers, nor which specific parts were imported.

Managers at Volkswagen Russia called regional officials for an urgent meeting this week, the source said, though the outcome of that meeting was not known.

Previously, Volkswagen has said: "If it really comes to sanctions against GAZ Group, we will have to review our business relationships, but we would not call into question our commitment to the Russian market."

Both sources and numerous workers at the GAZ plant in Nizhny Novgorod said Deripaska visited the factory shortly after the sanctions were imposed to talk to the group's top managers.

For now, most GAZ workers spoken to by Reuters said they had not been affected by the sanctions yet.

"Maybe we will feel it in a month, but everything is fine so far," said Mikhail, 48, who declined to give his full name or describe his job. (Reporting by Gleb Stolyarov; writing by Polina Devitt; editing by David Clarke)

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below