'The problem is you can't exchange those promissory notes for anything, and at this point no one would take them as a collateral because everyone knows how deeply in debt AvtoVAZ is,' said Mikhail Pak, auto industry analyst with the Metropol investment bank.

AvtoVAZ's sales are sliding as recession bites in Russia. It sold 29,000 cars in January, nearly half of the average monthly sales of 50,000-60,000 before the slowdown.

In 2008, AvtoVAZ sold 624,000 cars in Russia and exported more than 100,000 cars. AvtoVAZ still holds the top four spots in the ranking of best-selling cars in Russia.

The car maker's long-term debt at the end of September stood at 18 billion rubles ($516 million), but AvtoVAZ president Boris Alyoshin assured an investment forum in Moscow on Wednesday that the factory in southern Russia where production was halted was doing well.

'We are not a loss-making factory,' he said after acknowledging that the company has problems with working capital. 'Our earnings have gone up, the margin of profit is positive.' Alyoshin, however, was unable to provide figures.

Nataliya Sorokina, auto industry analyst with Uralsib investment bank, said AvtoVAZ faces 'a very acute problem with liquidity,' but she was confident the company would survive.

'The goverment will help them out,' she said.

The company already was given a boost in December when Prime Minister Vladimir Putin's government sharply raised duties on imported cars in an effort to help the domestic auto industry.

The higher duties brought thousands of protesters onto the streets in Russia's Far East, where many people draw their income from importing Japanese cars. The number of cars going through customs in Vladivostok fell about 95 percent in January.