Mr Shuvalov was shown around the assembly line for Lada Kalina and Classic models and met with AvtoVAZ veterans, workers and trade union representatives.

The discussion focused on employment in Togliatti and modernisation of the plant.

The First Deputy Prime Minister denied rumours of upcoming "huge" dismissals. "No dismissals are planned for AvtoVAZ," he said, adding that he "has been instructed by the Prime Minister to ensure that people quit their jobs only if they are offered new jobs."

Mr Shuvalov said that pension and pre-pension age workers would be laid off but would be offered a contract of service for up to two years to help during the plant's retooling. "I was told today that the veterans are ready to do this," Shuvalov said.

The government official said an AvtoVAZ subsidiary would be set up to employ pensioners and pre-pension age people. The subsidiary will be co-financed from the federal budget and its employees will retool AvtoVAZ for the production of new cars jointly with France's Renault.

"Our partners have confirmed their interest in developing AvtoVAZ; they will provide strategic long-term investment," Shuvalov said.

The decision to retool AvtoVAZ should be taken before the end of this year, he said, adding: "AvtoVAZ has a bright future that can be attained only through concerted joint efforts."

Shuvalov also said when visiting the plant that AvtoVAZ would transfer 17 social assets to municipal, regional and federal ownership without lowering the standards of service. The First Deputy Prime Minister said 1.8 billion roubles would be needed for these purposes in 2010.

"We are acting on the premise that nothing should change for the worse, that everything should only change for the better," Shuvalov emphasized.