The Russian steel producer Magnitogorsk Iron and Steel Works (MMK) has increased its total debt claims against Russia's second largest car producer GAZ Group from Ruble 1.021 billion ($29.7 million) to Ruble 1.488 billion ($43.2 million), due to an increase in interest on the outstanding bills for steel products delivered to the GAZ Group.
On February 11, 2009, MMK filed two lawsuits against GAZ over late payments for 2008 at the Nizhny Novgorod arbitration court, which posponed the hearing to April 8, due to the new claims.
GAZ's debts to creditors and suppliers have reached Ruble 45 billion ($1.3 billion) since the beginning of the year as the autobile industry in Russia struggles with rising prices for auto parts and other supplies, and faces a sharp slump in sales due to the global financial crisis. In January 2009 alone, Russia's car output dropped by 80 percent, as major automakers halted production lines for extended holidays or suspended work due to supply shortages.
Moreover, another supplier of steel to GAZ, Russian steelmaker Novolipetsk Steel (NLMK), said last week that it is prepared to take actions against GAZ if it fails to pay off its debts. NLMK could even insist on the company's bankruptcy, NLMK's chairman Vladimir Lisin has said to journalists. Mr. Lisin indicated that NLMK's total receivables stood at Ruble 1.5 billion ($43.6 million), with GAZ group's debts amounting to Ruble 1 billion ($29 million).
At the beginning of the current month, GAZ presented a debt restructuring plan to creditors, pledging to reduce production costs and introduce personnel cuts and other measures. The producer has already laid off about 50 percent of its employees and reduced top managers' salaries by 30 percent.
According to observers, car producer GAZ will not face bankruptcy, as the Russian government has pledged to provide it with state support.