Volkswagen Assets Frozen In Russia Over Contract Dispute

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Lots of automakers are fleeing the Russian market. Volkswagen is among them, but it is now facing a problem. A court in the country froze all of the company’s assets there, according to Reuters.

The dispute is because the Russian automotive manufacturer GAZ has a contract to produce VW vehicles in Nizhny Novgorod. Volkswagen ended its agreement with the firm in August. GAZ responded by suing for the equivalent of $201.3 million for allegedly breaking their arrangement.

Separately, VW is working to sell its interests in the country, which includes the factory in Kaluga. The process is reportedly nearing completion. “We hope the lawsuit will not delay the transaction,” a Volkswagen spokesperson told Reuters.

Leaving the Russian market is a complicated process for companies. The government there is requiring businesses from countries with sanctions against Russia to gain the approval of a commission before it’s possible to sell assets there.

In June 2022, VW announced a plan in Russia to pay workers and offer medical insurance if they would quit the company voluntarily. Volkswagen stopped building cars in the country shortly after the invasion of Ukraine, but selling the business has been a much more complicated process.

Other automakers already successfully left Russia. For example, Ford sold its assets there months after ending operations. The agreement includes an option for the Blue Oval to buy back the business within five years if the global situation changes.

Mercedes-Benz sold its Russian operations to the country’s auto dealer chain Avtodom. However, the German company retains a 15 percent stake in the Russian truckmaker Kamaz.

Renault sold both its own holdings in the country and the 67.69 percent interest in AvtoVAZ. Similar to the Ford deal, the automaker has the option to return to the country in six years if things change. There’s a possibility that one of the new owners could revive the Moskvitch brand.