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Canada’s Magna defies Ottawa’s call to sever Russian auto cluster contract

May 14, 2014, 13:41 UTC+3 MOSCOW
Magna, which was expected to receive payment for the preparation of the feasibility study, “risked losing the sum stipulated in the contract,” head of Russian carmaker company says
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Magna plant in Russia's Kaluga (archive)

Magna plant in Russia's Kaluga (archive)

© ITAR-TASS/Alexei Filippov

MOSCOW, May 14 /ITAR-TASS/The joint venture between the Russian carmaker Avtotor and the Canadian-Austrian auto parts manufacturer Magna will continue creating an auto cluster in Russia’s westernmost Kaliningrad Region, despite the Canadian government’s demand to sever the contract over Russia’s stance on the Ukraine developments, Avtotor said on Wednesday.

The Canadian company’s wholly-owned Austrian subsidiary convinced Ottawa that the contract severance would bring about “millions in losses,” Avtotor Holding President Valery Draganov told the Russian daily Izvestia.

The auto cluster joint project is currently at the stage of a feasibility study. Magna, which was expected to receive payment for the preparation of the feasibility study, “risked losing the sum stipulated in the contract,” Draganov said.

“Already at the next stages after the approval of the feasibility study, Magna will either join the business for the creation of the auto cluster or receive its payment,” he said.

Chairman of the Avtotor Board of Directors Vladimir Shcherbakov said on Tuesday during a visit by Russian Prime Minister Dmitry Medvedev to an Avtotor factory that the Canadian government had sent a letter to Magna urging it to sever its contract with Avtotor. Medvedev then instructed Russian Industry and Trade Minister Denis Manturov to keep the situation under control, including from the standpoint of relations with Canadian companies.

The joint venture, in which Magna holds 40% and Avtotor owns 60%, is implementing a project to build and operate five full-cycle auto factories and 16 auto parts enterprises in the Kaliningrad Region. The project is estimated at 150 billion rubles ($4 billion).

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