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Renault chosen as strategic partner for Russia's Avtovaz over GM

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Avtovaz will offer Renault a large minority stake in the struggling company, the Interfax news agency quoted an official with the state concern that controls Avtovaz as saying.

OAO Avtovaz has been considering bids from foreign companies including General Motors Corp. (NYSE:GM) and Fiat SpA.

Avtovaz President Sergei Chemezov will present the project to Renault Chief Executive Carlos Ghosn on Saturday in the Russian city of Togliatti, Renault spokeswoman Rochelle Chimenes said. She declined to give further details.

Avtovaz, maker of the boxy Lada sedans that were a staple among the relatively small number of car owners during the Soviet era, has found it difficult to compete with higher-quality imports.

Losing ground to foreign rivals in a domestic market growing fast amid Russia's oil-fueled economic boom, Avtovaz has been seeking a major foreign partner.

GM has been operating a joint venture with Avtovaz at a plant in the Volga River city of Togliatti since 2001. But the companies' relationship has been rocky since the Russian government effectively took control of Avtovaz in late 2005.

Last year, the joint venture temporarily halted production after a parts contract came under review. The two sides also were unable to agree on the joint construction of an engine plant in the central city of Samara, with Avtovaz saying it feared it wouldn't be able to recoup its investment.

GM has one other plant in Russia, a facility in Kaliningrad operated by Russian automaker Avtotor. GM also is building a third plant near St. Petersburg that is expected to begin production in 2008.

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Renault chosen as strategic partner for Russia's Avtovaz over GM
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