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Renault : Renault and the City of Moscow Launch Assembly of the Mégane in Moscow Paris, April 29, 1999 -- Avtoframos, the company owned in equal shares by Renault and the City of Moscow, is initiating the light assembly (Short Knock Down) of the Mégane and is also taking over the marketing of Renault vehicles in Russia. With the activation of this first operational stage, Renault will be able to begin training Avtoframos employees in Renault's international methods and quality standards. It also signals the determination of the two partners to continue a project that will lead to production of more than 100,000 vehicles by the year 2005. In the framework of its strategy of international development and profitable growth, Renault has chosen to begin, in cooperation with the City of Moscow, the first operational phase of its project in Russia. Renault, which is adapting the timetable for this project to the evolution of the economic crisis that first struck Russia in August 1998, is thus expressing its confidence in the potential recovery of the Russian economy.
Production will be carried out, in the initial stage, in premises leased from Moskvitch, whose majority owner is the City of Moscow. The two partners are planning production of about 2,000 vehicles in 1999 and 8,000 in the year 2000. The present schedule calls for the handover of Avtoframos' own buildings in the second half of 2000. They will initially consist of a complete assembly facility. A body shop and an ultramodern paint shop should be added in 2001: these new facilities will be designed in such a way as to allow gradual integration. This first step will lead to an acceleration in the training of Avtoframos personnel in the international Renault methods and quality standards. More than 100,000 man-hours of training are planned for the next three years. At present, there are about 100 employees, and that number should rise to roughly 600 next year. Also in this first phase, Avtoframos will accelerate the building of a network of suppliers who meet the international Renault criteria of quality, competitiveness and performance. In addition, Avtoframos will be in charge of the development of a sales and after-sales network for Renault vehicles, whether they are made locally or imported. Customer service is a vital element in the Avtoframos commercial policy and, in that context, the company has recently opened in Moscow a national parts warehouse to guarantee the immediate availability of components for the commercial network. A Renault training centre for network employees will be operational by next June. The Renault Mégane will be offered in two engine versions and with three levels of equipment. From May 1999, the price of the best selling model will be set at $14,900. The capital expenditures committed by the two partners are, at this stage of the project, still modest. Renault and the City of Moscow created the Avtoframos entity with an initial capital of 124 million rubles (about $5 million/FRF 31.2 million/4.7 million euros). That investment covered the preparation of manufacturing premises, initiation of operations, and the creation of the national parts warehouse and the Renault training centre. The next phase, which will call for heavier capital expenditures and more substantial facilities, is to be the object of a so-called "complementary" agreement with the Moscow administration, and an investment convention with the government of the Russian Federation. This complementary agreement, which will stipulate the rules for the functioning of the cooperative arrangements between the partners, is now in the process of being drawn up with the City of Moscow. Discussions are underway with the government of the Russian Federation relating to the preparation and signature of the investment convention. This convention will grant Avtoframos a temporary exemption from customs duties on imports of vehicles, parts and capital goods, which, in view of the investments, is necessary to assure the soundness of the company. The Moscow Duma has approved exemptions from local taxes which can benefit Avtoframos. If the present timetable is followed, the capital expenditures, of about $420 million, will be quickly begun. The major investment
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