MOSCOW (Reuters) - Russia’s biggest carmaker Avtovaz (AVAZ.MM) issued a plea for help to shareholders including Renault (RENA.PA) on Friday, after plunging demand at home drove it to a record loss and an audit revealed its frail finances.
Auditors EY said the maker of Lada cars had liabilities that exceeded assets by 67.78 billion rubles ($857 million).
“These conditions, along with other matters ... indicate the existence of a material uncertainty which may cast significant doubt on JSC Avtovaz and its subsidiaries’ ability to continue as a going concern,” EY said.
Avtovaz, majority-owned by Renault and its alliance partner Nissan (7201.T), said management was confident it could secure help from shareholders “at a level required to finance its operations in the foreseeable future.”
French carmaker Renault separately slashed the value of its stake in Avtovaz by 225 million euros ($253 million) to 96 million. Its finance chief said talks with other Avtovaz shareholders were ongoing.
Russian state-owned conglomerate Rostec, which has a 32.87 percent stake in the holding company that controls Avtovaz, said it was considering converting part of the debt it is owed by the carmaker into shares to increase the troubled firm’s capital.
Russia’s car industry has been hammered by a steep economic downturn, fueled by collapsing oil prices and Western sanctions over the Ukraine crisis. New car sales plunged 36 percent last year and are seen down for a fourth straight year in 2016.
Avtovaz made a net loss of 73.85 billion rubles in 2015, almost triple the loss it recorded in 2014.
The company, despite foreign involvement and a history of problems, has long been regarded by the Kremlin as a symbol of Russian corporate pride which cannot be allowed to go under.
President Vladimir Putin, who has in the past visited its sprawling factory in southwest Russia, owns a Lada Niva jeep, whose qualities he has publicly praised.
He made sure Avtovaz received a hefty loan to keep it afloat the last time it got into such serious financial trouble, during the 2008-9 financial crisis.
Despite its financial problems, Avtovaz said its share of the Russian market increased to almost 18 percent in 2015, up from 16.4 percent the previous year.
It said it was implementing an anti-crisis plan which included “revenue improvements, cost reduction measures and sales of non-core assets.”
Renault has a 50 percent stake in the holding company that controls Avtovaz and Nissan a 17.13 percent stake.
Reporting by Anton Zverev and Andrew Osborn; Editing by Jason Neely and Mark Potter