Moscow analysts estimate it “highly unlikely” AvtoVAZ would be allowed to go bankrupt despite the abrupt departure this week of CEO, Bo Andersson, with the company’s staffing numbers and huge supply chain thought to be the main drivers.
Andersson has left in the midst of the continuing dramatic slump in the Russian automaker’s fortunes in a turbulent market, which saw the Togliatti-based Lada manufacturer recently post a 2015 operating loss of RUB24.7bn (US$344m) compared to RUB10bn in 2014.
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The manufacturer has also introduced a four-day working week, with Andersson’s departure set against a Russian market which plunged 36% last year and is plagued by high interest rates, a falling rouble and fragile consumer confidence.
“It [bankruptcy] is possible of course,” EURussia managing partner, Ivan Bonchev told just-auto from Moscow. “But I would say it is highly unlikely.
“In my opinion, there would be a certain agreement between the two shareholders [Renault-Nissan and Rostec] where the foreign investor should not expect…not just be the State or Rostec to provide any funding to bail it out.
“[But] without State support, it could be pretty difficult. It depends how dramatic the market will continue shrinking.
“The majority of efforts should be done to sustain [a] temporary firefight and [reduce the] existing cost base as much as possible, make sure the company sustains production.
“Because at the end of the day there are certain positive prerequisites, because it is the company with the highest localisation rates.”
That domestic component element may be one of the main reasons why the Russian government is anxious to ensure AvtoVAZ remains a going concern, because, as well as employing tens of thousands in the monocity of Togliatti, 500 miles South East of Moscow, there are countless more working in the automaker’s supply chain.”
“This [bankruptcy] would be a major shock for a number of partners [in the] supply chain,” added Bonchev. “AvtoVAZ is located in a monocity where it is one, if not the majority employer.
“If they have to shut down completely, that is a dramatic decision.”
Just-auto has learned Andersson will not now be attending next week’s Russian Automotive Forum (RAF) in Moscow, where he was due to be a keynote speaker, with a product spokesman from the manufacturer now due to present instead.
That news is reinforced by the removal today [9 March] of Andersson’s picture from the list of speakers.
An AvtoVAZ Board of Directors’ meeting is scheduled for 15 March, at which time Andersson’s replacement is expected to be announced.
