Automakers shape for life in the slower lane

Russia's number two automaker GAZ says it will reverse its sliding market share, as buyers downsize in the credit crunch. The news comes as the head of luxury car manufacturer Audi reveals sales growth in Russia has collapsed.

Ownership by Russia's richest man Oleg Deripaska hasn't spared Gaz problems in the credit crisis. The makers of Russia's ubiquitous yellow minibuses have stopped production for 4 days after demand fell 10 per cent. To pay other debts they've also sold their 20% stake in car parts giant Magna.

But Igor Kulgan, Director of GAZ Powertrain insisted joint ventures with Magna would continue, and predicted a repeat of Russia's 1998 economic crisis, when sales soared.

“The crisis was followed by a dramatic increase in Russian products requirements because of lower cost.  We have different number of investments and projects with Magna, and all these projects are still valid.”

Audi admits expensive cars have already lost popularity, its sales growth in Russia collapsed from 13% to 3% in September. Rupert Stadler, Chairman of AUDI AG believes sales will continue to slow in the short term, but that the German carmaker can continue to grow.

“Maybe the growth pattern will change a little bit, but we are convinced that we are able to grow. Today's business meeting with our colleagues here in Russia we decided to increase the dealer network from 41 dealers to at least 90 dealers during the next 3 years.”

In America gas-guzzling car makers fear bankruptcy. General Motors is in merger talks with Chyrsler after losing more than $15 Billion in Quarter two.  Rival Ford earlier turned down GM's approaches, judging it had better hopes of survival on its own.