AN CONGRESS: Confident contract assembler GAZ eyes 10% EBIT hike
Renewed confidence at GAZ Group sees the Russian automaker predicting a 10% hike in EBIT (earnings before interest and taxes) this year.
Another sign of that confidence is Skoda's decision to launch contract CKD assembly of the Yeti last year at GAZ's Nizhny Novgorod plant - with the new Octavia to follow - while GAZ will also assemble Chevrolet Aveo vehicles in the same factory under a contract with General Motors for 30,000 units a year.
Nizhny Novgorod is the second factory to build the VW Czech unit's vehicles in Russia and is a JV between Volkswagen Group Russia and GAZ. The Yeti was the first model off the line in a plant with body, paint and final assembly shops.
As is common with new plants in Russia, production actually started from SKD kits in late 2011, with workers completing cars by installing powertrains in bodies already welded, painted and trimmed in the Czech Republic.
Last December, VW opened an engine factory at its other Russian site in Kaluga. That will supply its vehicle assembly plant there and the contract Skoda production at GAZ with locally produced engines from 2015.
Speaking at the Automotive News World Congress dinner in Detroit, GAZ CEO Bo Andersson highlighted the manufacturer's brutal rationalising four years ago and the pivotal role of the Russian military.
"We are the number one supplier of trucks to the military and we service them," he said. "We took off 50,000 people in 2009, we fired 10,000 managers, now we are US$300m net income. For 80 years the Nizhny Novgorod plant had no leader - now we have a leader. [Vladimir] Putin likes me - he says I am smart guy."
Despite no longer operating against the backdrop of the Soviet Union, GAZ still retains a large amount of influence in the city, owning the community hospitals and sports centres, for example.
Andersson emphasised the importance of employee relations noting that the vast factory site has 42 canteens where staff are given 20 minutes each morning to eat a free breakfast.
The automaker also provides the union with US$40m per year and employees earn the equivalent of around US$500 per month.
Andersson said Russia market was an unusual market with vehicle ownership of just 271 per 1,000 people but, in a sign of where the real economic power of the country lies, export oil revenue is US$1bn a day.
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