AutoBeta(AutoBeta.net)04/11 Report--

Shortly after Volkswagen lifted some of the assets freeze in Russia, Volkswagen received another $348 million in compensation from the Russian GAZ Group.

On April 11, media reported that Gorky Automobile Plant, a unit of the Russian GAZ Group, filed a lawsuit in Russia's Nizhny Nizhny Novgorod District Court on April 7 to recover 28.4 billion rubles ($348 million) from Volkswagen.

So far, details of the lawsuit have not been released, and Volkswagen declined to comment. It should be noted that this is the second lawsuit by the GAZ Group that Volkswagen faces in Russia.

In a lawsuit in March, GAZ said Volkswagen's attempt to withdraw from the Russian market harmed its own interests, and GAZ asked Volkswagen to compensate Volkswagen for a loss of 15.6 billion rubles (about $201.3 million) as compensation for terminating the contract. Shortly after the lawsuit was filed, a Russian court agreed to settle the GAZ dispute by freezing all Volkswagen assets in the country during dispute resolution.

On March 20th, a court in the Russian region of Nizhny Novgorod froze all Volkswagen's assets in Russia. GAZ believes that Volkswagen plans to withdraw permanently from the Russian market and sell the remaining assets to a third party in the near future. If Volkswagen Russia sells shares in its legal assets, Volkswagen will no longer have any other assets in Russia, so it has applied for guarantee measures. In response to the incident, Volkswagen's Russian subsidiary told the media that it was surprised by the lawsuit and said the partnership with GAZ "ended on mutually agreed terms." "We have been informed of GAZ's claim and are familiar with the case materials," the company said in a statement.

On April 4, a Russian court announced the partial lifting of the freeze on the assets of Volkswagen in Russia, while there was news that Volkswagen might sell its factory to local investors.

According to the official website of Volkswagen Group Rus, Volkswagen Group currently has two major factories in Russia, Kaluga and Nizhny Novgorod, with a total of 4800 employees, of which the Kalu processing plant is its flagship plant, accounting for about 4000 employees. Data show that Volkswagen Group produced a total of 170300 new cars in Russia in 2021, including 118000 at the Kalu processing plant and 52300 at the Nizhny Novgorod plant. In terms of sales, Volkswagen Group accumulated sales of 199200 vehicles in Russia in 2021, accounting for 11.9% of the Russian market share. The Russian GAZ Group, founded in 1930, is the product of Stalin's first five-year plan to develop the industry of the former Soviet Union. It is also the second largest commercial vehicle manufacturer in Russia and the seventh largest commercial vehicle manufacturer in the world, with an annual output of 200000 vehicles.

GAZ Group once assembled cars for Volkswagen. GAZ Group and Volkswagen Group Rus formed a bond in June 2011. at that time, the two sides signed a contract to assemble Volkswagen and Skoda cars at the GAZ plant in Nizhny Novgorod. Among them, the Nizhny Novgorod plant, which belongs to the GAZ Group of Russia, began to assemble Taos and Skoda models for Volkswagen Group in 2011, with an annual production capacity of 132000 vehicles. It mainly produces Skoda brand models such as Mingrui, Kodiak and Klock. Subsequently, in June 2017, Volkswagen signed cooperation agreements with the GAZ Group in three areas, including the extension of the bus production contract at the Nizhny Novgorod plant; the supply of Volkswagen engines for GAZ-branded light commercial vehicles; and the intention agreement to consider strategic cooperation opportunities between Volkswagen trucks and buses and the GAZ Group.

The Russian auto industry stalled due to the war between Russia and Ukraine and disruptions in the supply of spare parts. Volkswagen suspended operations in Russia in March 2022 and terminated its production agreement with GAZ in August 2022, so GAZ sued Volkswagen for breach of contract and applied to the court to freeze all Volkswagen assets in Russia.

In addition, Volkswagen Group also had to consider selling Russian factories in the context of the normal operation of the factories. Volkswagen had previously said it was applying to Russian state authorities for approval to sell its stake in Volkswagen Group Rus, including the Kalu processing plant, which employs more than 4000 people, and hoped to sell the stake to "a trusted Russian investor". However, due to the Russian assets freeze, the deal can not proceed normally.

Although part of the freeze on Volkswagen's assets in Russia has been lifted, the dispute between Volkswagen and GAZ continues, and the two lawsuits could be an obstacle to Volkswagen's sale of Russian assets. Of course, in fact, Volkswagen Group, as one of the largest foreign investors in the Russian automobile industry, has invested more than 206 billion rubles in its Russian business. Volkswagen's decision to divest its business in the Russian market also means it will face a considerable loss.

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