GAZ Group - part of Russian Machines and Basic Element - says it made the right decision to axe its own passenger car production and concentrate on commercial vehicle manufacture and contract building of models for General Motors, Volkswagen, Skoda and Mercedes Benz. 

"Most people felt it was the wrong decision to step out of passenger cars," GAZ Group president and CEO, Bo Andersson, told reporters including just-auto near to his home this week in the Russian company's Nizhny Novgorod base. "I showed [Oleg] Derispaska [Russian Machines owner, Basic Element chairman] 20 years of decline.

"It was not an easy decision, but it was necessary. My short-term thinking was if you don't do something, you will just die."

Despite moving away from its own production of passenger models, GAZ is Russia's largest manufacturer of commercial vehicles, with 13 plants, producing around 50% of LCVs, 58% of medium-duty trucks and 65% of buses.

It also produces cars for Skoda - Yeti and Octavia - Volkswagen - Jetta - Chevrolet - Aveo and Mercedes Benz - Sprinter.

"We closed 2012 with 2.9m vehicles which was up 11%," said Andersson. "This year it will be around 3m, maybe a little bit more. It has got potential to grow to a 4m unit market - it is not a bad market but it is extremely competitive - 4m vehicles by 2020 - it is not unlikely."

Andersson has friends in high places and regularly cites Russian President, Vladimir Putin, as a backer of what he is doing at GAZ. "We have had the benefit of having Putin here four or five times - I feel he is very supportive of what we have been doing," he said.

"His people are somewhat irritated with me because I look at productivity per employee and sales per employee - every time Putin is saying 'that is great' and people are saying 'don't show him these charts.'

"Putin looked at me with his blue eyes and said 'fix that' [productivity] - I fixed it. I am impressed with his [Putin's] work ethic - he works a lot. His interest is very high and his expectations are very high."

Part of Andersson's key to turning GAZ into a more formidable player has been his wooing of powerful unions - who appear to be supportive of his methods that saw revenue of US$4.4bn  in 2011 - up 37% from the previous year and turn in a US$283m profit.

"I had a meeting with the union officials two years ago," he said. "People said toilets, health care, food, is terrible.

"I said I am relieved because this morning I was thinking about the impact of WTO and not being able to pay the interest to the banks and running out of cash, but if these are the only issues, I know exactly how to fix [them]."

To that end, Andersson gives the union - OAO GAZ - US$30m for social benefits, health care and salary increases - which is for the labour body to decide how to apportion. "I put all the burden on them," he said.