GM to build sporty Lada

A sporty Lada could be good news for Russian firm

General Motors will build the new Lada in a joint venture with Russia's main car manufacturer, AvtoVAZ, under the iconic Chevrolet badge.

The car will be an updated version of AvtoVAZ's Lada Niva, called the Chevy Niva, and is being described as a sports utility.

GM announced the $332m deal at the Geneva Motor Show.

The all-wheel drive Chevy Niva is aimed at the Russian market but Lada's strong sales in Western Europe mean it will probably find a receptive market there too.

GM and AvtoVAZ will each hold 41.5% of the new company with the London-based European Bank for Reconstruction and Development will hold the remaining 17%.

Production will begin in 2002 and GM expects 75,000 to be built per year with a third of the output earmarked for export, mainly to Germany.

Foothold in Russia

The deal gives GM the lead in Russia over Renault, Fiat and Ford, who have all been trying to gain a foothold. BMW is the only other foreign car maker operating in Russia with a small production line in Kaliningrad

The Chevy Niva will be built at AvtoVAZ's main factory at Togliatti on the Volga near the Ural Mountains.

Deal makes GM the leading foreign car maker in Russia

The deal is good news for AvtoVAZ which has been looking for a foreign partner for years to invest in its plant and to help develop new model.

The company has been plagued by allegations of corruption since it was privatised by the Russian government. A government investigation was halted last year.

New cars cost about $4,000 in Russia but GM expects to sell the Chevy Niva for about double that. The export model will be even more expensive.