OREANDA-NEWS. February 17, 2010. With a modern diesel engine, GAZ vehicles would be more in demand with customers, while VEB financing for engine development would allow Autodiesel and GAZ group to improve their finances.

Vedomosti reported on February 17 that shareholders of AutoDiesel, a GAZ Group unit, have approved taking a RUB 5.8 billion (USD 190 million) VEB loan. The money will finance the development of a modern diesel engine, with a 4.4- to 6.4-litre capacity, to Euro-4 and Euro-5 standards. The engine is being developed in cooperation with Austrian AVL. At the end of 2009, Russian Technologies State Corporation, which holds 31% in the company, blocked this deal, but it now seems that the project will go ahead.

In our view, the news is positive for GAZ Group shareholders. The automaker now lacks a modern mid-sized diesel engine, which could be fitted into mid-capacity commercial vehicles and low-capacity buses. In our view, demand for GAZ vehicles, fitted with diesel engines, could jump in the range of 10-15%, while the release of bank financing would allow the automaker to improve its financial standing. The company has invested around RUB 3 billion (USD 100 million) from its own funds into this project.