A presidential campaign poster for Russia's PM Putin is on display in Tolyatti
A political campaign sign near AvtoVAZ's factory in the southern Russian city of Tolyatti. The sign features Vladimir Putin, who as Russia's prime minster has pushed a partnership between AvtoVAZ and a joint venture between France's Renault and Japanese auto maker Nissan. Reuters

Russia's OAO AvtoVAZ will seek to raise as much as 60 billion rubles ($2 billion) as part of its effort with partners Renault SA (EPA: RNO) and Nissan Motor Co. (TYO: 7201) to increase its Russian market share and convert funds borrowed from the Russian government into AvtoVAZ shares, the Renault-Nissan alliance confirmed Wednesday.

Renault-Nissan already owns a 25 percent stake in AvtoVAZ and in early April completed a €400 million ($526 million) upgrade of the company's factory in Tolyatti, southern Russia.

Renault-Nissan, led by CEO Carlos Ghosn, is negotiating with AvtoVAZ's principal owner, state-controlled Rostekhnologii, or Russian Technologies, to increase the joint venture's holding to a controlling share.

It's in progress, said Raluca Barb, a Renault-Nissan spokeswoman, adding that Ghosn on Wednesday was attending a board meeting at which details of the deal were being discussed.

The goal is to make 40 percent market the share by 2016 between the three brands, Barb said. Under a 2009 agreement with Russia's government, AvtoVAZ must maintain at least 25 percent market share in its home country.

France's Renault bought a 25 percent stake in AvtoVAZ in 2008, but the Russian government stepped in to bail out the company a year later, at a cost of 40 billion rubles. Terms of the rescue loan called for converting the borrowed money into AvtoVAZ shares while preserving Renault-Nissan's stake and allowing the foreign partner to participate in AvtoVAZ's planned capital-raising.

The bailout also requires the partnership to manufacture 900,000 cars a year by 2015, 70 percent of which must be AvtoVAZ models; to keep AvtoVAZ's Russian market share at 25 percent or more; and to develop the auto maker's exports. Renault also committed to investing at least €240 million by 2012 and maintaining its 25 percent AvtoVAZ stake.

The pending deal marks an expansion of Renault's initial agreement with Russia's government. While Renault currently owns 25 percent of AvtoVAZ, the Russian government owns roughly 50 percent of the company through financial-services firm Troika Dialog and Russian Technologies. Troika Dialog already plans to sell its 21 percent stake to Renault-Nissan, according to Bloomberg News, but Russian Technologies hasn't yet committed to a sale.

If the deal is successful, AvtoVAZ would remain under Russian management. At this time there is no talk of Ghosn stepping in as CEO, Barb said.

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