Putin hints at Lada-owner rescue

Lada is an iconic Russian brand

Russia's Prime Minister Vladimir Putin has said that Lada-owner Avtovaz could be bailed out by the government.

"The sum that is being discussed is 20bn (£415m; $586m) roubles," Mr Putin announced to workers in Togliatti.

The firm is seeking 26bn roubles from the government to pay its 44bn roubles debt to suppliers and creditors.

Autovaz shares rose 28% following the news, from a depressed level due to fears the iconic car firm could collapse amidst falling sales.

Mr Putin said the money would help the company survive the economic downturn.

"If you are managing to cope at the moment without this package of measures then I am sure the work will be even more stable in the future," the Prime Minister said.

Earlier on Monday, Russia's Industry Ministry forecast that the country's car sales would fall 60% in 2009.

Car firms worldwide have been struggling in the wake of the global slowdown.

Former glory

Until last year, Russia's car market was the fastest growing in Europe.

Desperate to profit from the booming car market, the French carmaker Renault paid $1bn for a 25% stake in the company a year ago.

Since then demand has been badly hit because of the economic crisis and sales of Lada cars has decreased by 40%.

Work on its production line had to shut down in March because of a dispute with one of its suppliers.

Avtovaz is the key employer in Tolyatti, a city of 700,000 people on the Volga River.

Analysts believe the government fears any mass lay-offs in cities which depend so heavily on one industry could lead to unprecedented levels of social unrest.