Following on from a wide-ranging Memorandum of Understanding signed with Avtovaz in October, Fiat is considering making a financial investment in Russia's biggest carmaker. Photo: Lada's 4-door Kalina saloon at the Frankfurt IAA in September.

Russia's biggest carmaker, Avtovaz is set to name its choice of an outside strategic investor this coming Friday, according to media reports, with US$2 billion price tag for a minority stake being touted. Avtovaz, which builds a range of vehicles under the Lada brand name, is in urgent need of significant investment in order to retain its leading position as the Russian new car market undergoes rapid and major growth, and Fiat is being touted as the favourite to take a stake.

The new reports come from Automotive News Europe, who quote an Avtovaz spokesperson, Natalya Sidoruk. "You'll learn everything on December 7th," she told ANE. The board of directors is reported to be meeting on Friday (7th December) with the successful party being named. ANE suggests a price of US$2 billion for the stake.

Avtovaz has undergone years of decline and selling a stake externally will provide much needed funds as well as new technology. The Russian carmaker has been in talks since the summer with several leading global carmakers, including Fiat, the French firm Renault, US giant General Motors and the ambitious Canadian company Magna which is looking to become closely involved in automotive manufacturing.

Avtovaz has said it plans to sell a portion of its shareholding to a foreign company, but hasn't elaborated as yet on the size of the stake. Meanwhile yesterday ANE said that Sergei Chemezov, head of the newly created holding Russian Technologies, which will include AvtoVAZ, has said the carmaker had also offered to sell a 25 percent stake to Russian-based metals companies. "In any case, the [Russian] state will retain a blocking stake in Avtovaz, 25 percent plus one share," ANE quoted Chemezov as saying in a recent interview with Russian newspaper Nezavisimaya Gazeta.

According to the ANE report yesterday, Fiat is the clear favourite to become the chosen company because "it is more flexible and, unlike Renault, would design cars under the Lada brand." Any deal with Fiat would revive a long tradition of cooperation which began when the Italian automaker helped set up Lada. The Avtovaz factory, Togliatti, was named after an Italian communist, and the first car it built, under the Lada brand name in the late 1960s, was based on a revised Fiat 124. Lada has one of the world's largest factories with more than 90 miles of automated production lines, and it is also significant that the overwhelming proportion of components can be made within the facility.

Fiat CEO Sergio Marchionne ratcheted up the rumours about a deal with Avtovaz when he said last Friday: "This is a company that needs bringing back to health. So what would be needed from Fiat should not to be underestimated and goes beyond the investment it would need." He added that it would "open up an enormous market, including ... development of joint platforms with them. It would be a big step forward. We are looking at it, then we'll see."