Industry, manufacturing

GAZ lets LDV slip away

17 Jun '09
Olga Konovalova, news editor

On May 6th, 2009, Marchmont wrote that GAZ Group was selling LDV, its British auto van plant to Westar, a Malaysian company which assemblies and sells LDV’s Maxus vans in Asia.

At the time LDV was on the edge of bankruptcy and the deal with Weststar was deemed as the only hope to keep on production in Birmingham, and thousands of jobs along with it. However Weststar failed to raise needed funds and broke the agreement.

The axe falls

LDV had to file for protection and the receiver immediately terminated 810 of its 850 employees. The latest word is that the Malaysian firm is willing to buy LDV's "good assets" but the bankrupt vanmaker and the thousands of auto workers and suppliers in the UK are out in the cold.

LDV is GAZ Group’s only foreign asset, which it bought in 2006 from Sun Capital investment fund for £22m ($36m). Oleg Deripaska announced back then ambitious plans to move Maxus production to GAZ plants in Nizhny Novgorod, as well as to start making Gazelle-3 minivans using the British platform.

But the project never made it--only 82 Maxus; were assembled in Russia in Q1. According to the company’s official announcement, “the ongoing financial crisis and unavailable loans forced the company to change its investment priorities. Alterations in currency exchange rate made the project to assemble Maxus vans in Russia economically unreasonable.”

Too little, too late

In late April LDV management tried to file for bankruptcy protection, but at the last moment Weststar came to the rescue. The British government advanced a £5m ($8m) bridge loan to support LDV during negotiations.

But the funding wasn’t enough. Weststar asked the government for another £45m ($75m) bridge loan, but ministers rejected the plea, and the firm had to withdraw from the deal.

Westar told the press that " has now completed the legal, financial and engineering due diligence on LDV. However, despite substantial efforts and a significant planned investment of its own funds, it has been unable to secure the remaining investment required to refinance the business".

It further addded that it had "...explored all known avenues to access this funding, including assistance from the UK government, but without this in place, it is not possible to deliver the plan.’’

GAZ gives up

GAZ Group also gave up and refused to invest any further into its troubled asset. The Gaz spokesman said: “Over the past few months, Gaz has been committed to finding a solution to ensure manufacturing remained in Birmingham. We have exhausted all possibilities, pursuing an MBO [management buyout], approaching foreign investors such as Weststar and holding extensive talks with Government to try to secure bridging funding.”

Plagued with a crushing debt load and deteriorating car sales in Russia, the LDV deal is probably dead while Oleg Deripaska and GAZ shifts focus to its part in Canada’s Magna and state-run Sberbank's deal to purchase German Opel from General Motors (see Marchmont news update “GAZ gets Opel, but is it enough?” of June 3, 2009).

Cherry picking "best assets"

On Monday, June 2, PricewaterhouseCoopers (PWC), acting as administrators for the bankrupt LDV, officially took over the plant and fired 810 workers, leaving a skeleton crew of 40 to maintain the site. An LDV spokesman said, as quoted by The Times, that a further 1,200 jobs were at risk in dealership and distribution, while an estimated 4,000 jobs with parts suppliers could also be lost.

Last week British papers wrote that since Westar was unable to buy the whole company, it was now looking to make an offer for LDV’s “best” assets. Rob Hunt, joint administrator and partner at PricewaterhouseCoopers (PWC) in Birmingham, told The Financial Times, that Weststar was among three parties wishing to engage in talks with PwC over LDV.

He expected to begin talks with Weststar and other interested parties over the coming days, but he did not expect clarity in negotiations much before the end of June.

The Financial Times wrote, that being in receivership actually increases the chances of an asset sale because a buyer would no longer be responsible for LDV’s liabilities.

The future of LDV isn't in the UK. Experts feel that a foreign buyer will simply do a "lift and shift"--move production of the Maxus van to a low-cost manufacturing center in Asia or eastern Europe.
Publish in Twitter
Write to Facebook
Google Buzz
Write to LiveJournal
Show in MM
Share MK
Find Related Content
Latest News: Feature stories
27 Aug '18 | Transport, logistics | Technology & innovation
7 Jun '18 | Technology & innovation
21 Nov '17 | Industry, manufacturing | Materials, extraction

Feature stories

2 Nov '18
Drawing upon in-depth interviews, the book channels...
27 Aug '18
7 Jun '18
Russian scientists have come up with a new method of...
Search (News archive - 21293)
Independent Software Developers Forum
Marchmont News

Latest News

14 Dec '18
InSize, a Russian company, has developed and is...
13 Dec '18
Educate Online is developing a Russian online...
12 Dec '18
Alex Pachikov, son of Evernote founder Stepan...

Most read stories from last week

13 Dec '18
Educate Online is developing a Russian online...
14 Dec '18
InSize, a Russian company, has developed and is...