Mar 20, 2023
Volkswagen Russian Assets Frozen in Win for Sanctioned Billionaire Deripaska
(Bloomberg) -- Volkswagen AG’s planned sale of two Russian units is on hold after sanctioned billionaire Oleg Deripaska’s GAZ Group won a court order to freeze the German carmaker’s non-cash assets.
The decision by a court in Russia’s Nizhny Novgorod region came in response to GAZ Group’s lawsuit seeking to recover 15.6 billion rubles ($203 million) in damages from Volkswagen over the termination of an assembly contract, according to court documents dated March 17.
The asset freeze affects a 4,000-worker factory in Kaluga and the Volkswagen Group Rus import business.
VW said it was “surprised” by the claims from GAZ Group and that it was reviewing the case materials.
“We hope that the claim will not lead to a delay of the transaction, which aims to secure employment and work for the affected employees,” Volkswagen said in a statement.
Many international companies from McDonald’s Corp. to Ford Motor Co. have cut ties and shuttered locations in Russia in response to economic sanctions following Vladimir Putin’s invasion of Ukraine last year. For a lot of them, such as BP Plc, Dutch mobile provider Veon Ltd., Philip Morris International Inc. and now Volkswagen, the exit has been cumbersome.
Deripaska and his companies have been under US sanction since 2018, and he was also placed under European penalties after the invasion of Ukraine. Volkswagen had operated under a special license from the US as it wound down its business with GAZ.
After suspending vehicle production at its factory in Kaluga and halting exports to Russia, Volkswagen recorded expenses of around €2 billion ($2.1 billion) last year as a direct result of the Russia-Ukraine conflict, with €1.5 billion attributed to automotive activities and €500 million to financial services. Responsibility for the Russian region was transferred from the Volkswagen brand to Škoda in a restructuring last year.
Porsche AG’s import subsidiaries in Russia are not included in the group and are therefore not impacted by the court decision, a spokesperson said.
Porsche said there was no update on the status of an agreement in December to sell its three Russian subsidiaries. The 911 maker said in its annual report that the legal transfer of ownership is still subject to approval by authorities, and that the purchase price was expected to be decided in the first quarter.
(Volkswagen corrects earlier statement to say Porsche subsidiaries are not affected by the decision.)
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