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International Business, 8th Edition by Michael H. Moffett, Iikka A. Ronkainen, Michael Czinkota

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PART 3 CASE 4

THE GM–AVTOVAZ JOINT VENTURE*

Moscow–General Motors Corp., the world's largest automaker has sealed a $332 million deal to build cars in Russia, a move seen as a show of confidence that Western companies are ready to take a chance here again, three years after the financial crisis that drove many of them away. GM's president, Rick Wagoner, flew to Moscow to meet Prime Minister Mikhail Kasyanov of Russia and then signed documents Wednesday creating a joint venture with AvtoVAZ, Russia's largest domestic car manufacturer, culminating years of difficult negotiations.

—“GM Joint Venture Shows Confidence in Russia,” The Washington Post, June 28, 2001.

“It's the beginning of Russia's integration into the world's car market. We cannot live in isolation anymore, and we think our buyers should be able to take advantage of the world's experience.”

—Vladimir Kadannikov, Chairman of AvtoVAZ, June 28, 2001

General Motors Corporation (U.S.), the world's largest automobile company, had reached agreement on its joint venture (JV) with GAO AvtoVAZ (Russia). The JV had been GM's solution to the problem that had confronted all Western automakers in Russia: how to penetrate a market which desired and appreciated higher quality, but could not pay for it. The problem for Russian automakers was how to gain the knowledge and technical know-how to produce higher quality and yet keep costs down. These were the forces that had driven the two parties to enter into the JV in the spring of 2001. ...

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