The man who led the modernisation at Dacia has repeated the trick at AvtoVAZ. Renault’s Christian Estève talks to Mark Bursa
He’s one of Carlos Ghosn’s most trusted lieutenants. For the past decade he has led the turnaround at two of Renault’s most ambitious overseas investments – Dacia and AvtoVAZ.
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His name is Christian Estève. And today is his last day at work. In fact, Estève’s last assignment before he retires is to field questions from this reporter. I’m honoured.
In fact, we go back a long way. I first met him when, as managing director of Renault UK in the early 1990, he laid the foundations for a decade of growth. The Clio, the car that drove up Renault’s British market share, was launched under his watch.
A stint in Paris was followed by a more challenging task – turning round Romanian automaker Dacia, which Renault had just acquired. The problems he faced are documented elsewhere on just-auto [links]. Undoubtedly the project has been a major success. “The Dacia plant is at full capacity of 460,000. It is an island of prosperity in Romania.”
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Estève’s reward was a posting even further East – to Togliatti, where he was charged with repeating the job at Russia’s biggest automaker, AvtoVAZ, in which Renault had acquired a 25% stake. This has proved to be a rather more awkward assignment, one not helped by the past two years of global economic turmoil.
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By GlobalDataYet the problems were very similar, he says. “Russians don’t like to be compared with Romania. They are both proud of their car industry, but the problems were exactly the same. No new product, no money and no clear vision for the future. I call AvtoVAZ a Hollywood version of Dacia. The most difficult job was to convince them that if they carried on in the same way, they faced disaster. I had to tell them again and again what they had to do.”
Estève is under no illusions as to how severe the problems were at AvtoVAZ. “Fifteen months ago, AvtoVAZ was basically bankrupt,” he says, starkly. Collapse of Russia’s biggest carmaker would have been catastrophic, not least for the city of Togliatti, where 110,000 of the total 750,000 population worked at the plant.
Much has been done to modernise the AvtoVAZ plant, which was showing its age when we visited in 2007. Significantly – and symbolically – the last ‘classic’ Zhiguli rolled off the line last year, ending almost 40 years of production at Togliatti of the Fiat 124-based car that started the project in the late ’60s.
In its place are a new “B-zero” line, making Lada-branded versions of Dacia models, specially adapted for Russian tastes. One of the three parallel kilometre-long lines at the plant has been fully refurbished and cleaned to build these cars, as well as one Nissan model and two Renaults.
The Nissan will not be the new Micra, but “a brand new car based on the Logan platform”. In fact all the B-zero line cars use the same platform, and the line will be able to build up to 300,000 cars a year. “It is a wonderful ‘cathedral’ -we have done a lot more than just cleaned up the line,” Estève said.
As for the faithful Zhiguli, it hasn’t been killed off completely. There is still demand for the ultra-cheap saloon, and production has been shifted to another plant within AvtoVAZ’s orbit, IzhAvto in Izhevsk.
Introducing the new Dacia-derived “instant Ladas” is one of five major initiatives that Renault is undertaking with AvtoVAZ. A chassis project is developing a new platform for AvtoVAZ; new engines and gearboxes will also be built at Togliatti; and a supplier integration project will aim to raise the quality of locally sourced parts.
The final project is the development of a new AvtoVAZ car, based on the newest current AvtoVAZ model, the Kalina. “It’s a new car by East European standards. We are working on quality improvement and making improvements. Even Mr Putin finds the Kalina better now.”
The timing is good, as the Russian market is recovering strongly at the moment. “2010 is a very good year. This year the market will reach 1.9 million cars, but right now it is running at an annual rate of 2.4m,” Esteve says. “And it will reach 3m by the end of 2011 – very close to the German market.”
A scrappage scheme, negotiated with the Russian Government, has helped too – there are still vast numbers of old AvtoVAZ cars on the roads, so the scrappage concept works well in Russia. All this has been achieved without Renault taking control of AvtoVAZ. The shareholding has been kept below the control threshhold of 25%, and will stay that way.
“We went through a complete financial restructuring of the company and today, AvtoVAZ is making profit.” The company will produce “slightly below 600,000 cars” in 2010, still some way short of its Communist-era heyday, but there is plenty of scope for growth. “We are now at the break-even point,” Estève says. “AvtoVAZ is now a debt-free company, generating cash.”
AvtoVAZ is only one part of Renault’s Russian strategy. It also manufactures a range of cars at Avtoframos, its former Moskvich plant in Moscow, which is run as a joint venture between Renault and the City Government.
A second phase of development at Avtoframos is currently under way, giving it an installed capacity of 160,000 cars. “We produce Logan and now Sandero, and we will be producing the Fluence and Megane hatch from the beginning of next year and the Duster from the middle of next year.”
“We are sold out to the end of the year and suffering from a lack old cars,” he adds. “Renault should be finishing the year with a 5% market share, which is a good result.”
And Renault’s alliance partner Nissan is also now present as a manufacturer in Russia, having opened its new plant in St Petersburg. “The objective of the alliance is very clear – to achieve 40% market share in Russia,” Estève says. “Mr Ghosn says that is 25% for VAZ, 8% for Renault and 8% for Nissan – which makes 41%!” he adds with a smile.
The idea is for AvtoVAZ to maintain its separate identity, though it will build some Renault and Nissan vehicles. But Estève does not rule out a return to export markets for the Lada brand. “We took the decision to pull the brand out of foreign markets, but Lada has a strong following in Western Europe. The Lada brand is one of the assets of AvtoVAZ. It was a success in the 1970s. I hope that in two years time Lada will be exhibiting again at the Paris Show,” he says.
What’s more, Christian Estève wants to be there to see it. He may be retiring as a day-to-day employee, but he’ll remain on the AvtoVAZ board, and act as “a cultural bridge between Russia and France”, helping to smooth the path to recovery.
He describes his relationships with Renault’s two adopted East European children as “two love stories”, and retirement is unlikely to mean the ties will be easily cut. See you at Paris in 2012, Monsieur Estève.
Mark ‘Coolbear’ Bursa
