Car Makers Reach Out

2 Pages 554 Words

Car Makers Reach Out

Russia’s best car makers still cant match the western standards on performance, comfort and safety, two leading car company’s have taken the initiative and negotiated alliances with separate multinational car companies to produce western style cars in Russia. These cross border strategic alliances have a chance of working according to many financial analysts. When considering an alliance there are several things that need to be looked at in order to determine how to implement a successful relationship between companies. If both companies are successful it should prove to very profitable for both companies because of the large market share both these companies would occupy.
The president of Gaz motors struck a deal with Fiat for 850 million dollars and created Nizhegorod motors. They aim to reach a production level of 150 thousand cars a year, for a five year period. The deal also calls for about 20 parts suppliers from Europe and the U.S. to set up factories in Russia.
Avtovaz Russia’s largest car maker teamed up with General Motors subsidiary Opel, which plans to invest 80 million dollars to produce 35 thousand Opel cars a year. This is a deal that should last a couple years, and if all goes well then General motors will build a factory that will produce 250 thousand cars a year in a joint-venture format similar to that of Gaz and Fiat.
Under Russian law, automakers have five years from the start of production to certify that 50 percent of the components in new vehicles come from Russian suppliers. By joining with Avtovaz, GM will effectively start its own network of Russian suppliers, and GM will already have fulfilled those requirements.
The president of Avtovaz has a vision that it could become a multinational car company. Still, becoming internationally recognized is not an easy task. First it would have to become successful in the domestic market. Russia presents many challenges w...