Renault SA (RNO.FR) is keen to deepen its collaboration with Russian auto maker AvtoVAZ (AVAZ.RS), but an agreement that would allow the French company to increase its 25% shareholding in the maker of the Lada brand hinges to a large degree on AvtoVAZ's valuation, a senior Renault official said late Thursday.

"Nothing has been decided" about increasing the 25% stake that Renault bought in 2008, Chief Operating Officer Patrick Pelata said.

Speaking to a small group of journalists on the sidelines of an event organized by the French automobile manufacturers' association, Pelata pointed out that "a lot has happened" since it bought one-quarter of AvtoVAZ's capital for $1 billion.

Since then, Renault has pumped a lot of equipment, proprietary technology and engineering manpower into the Russian company to modernize its manufacturing methods and show it how to develop fresh, up-to-date products. Valuation now becomes tricky, Pelata pointed out, as "you don't want to pay for your own work."

Russian Prime Minister Vladimir Putin said in November that Renault and its alliance partner Nissan Motor Co (NSANY, 7201.TO) were welcome to raise their AvtoVAZ stake up to 50%, a move that would give the two effective control of AvtoVAZ. Renault Chief Executive Carlos Ghosn said at that time that such a move as "absolutely logical" and that the Renault-Nissan alliance would consider Putin's proposal.

Pelata said increasing the stake to 50% makes sense "if it's done at the right price and provided everyone agrees inside AVAZ that this is in the interest of the company."

But even if a deal can't be struck, he said, "I believe we can still do lots of things together."

-By David Pearson, Dow Jones Newswires; +33140171740; david.pearson@dowjones.com
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