This week sees the annual Russian Automotive Forum (RAF) in Moscow and just-auto is in the capital to report on what has undoubtedly been one of the country’s most turbulent years ever.
Last year, sales plummeted 36% – although, extraordinarily, February numbers showed a huge improvement to a drop of ‘only’ 13% – a truly remarkable slowdown which Association of European Businesses (AEB) Automobile Manufacturers Committee (AMC) chairman, Joerg Schreiber describes as: “An unexpected and welcome development, much of it being attributable to the low volume base of last year.
“Now spring season is approaching and this is usually good news for car sales,” he adds. “So the coming weeks will show in what shape consumer demand really is these days.”
Is that spring thaw – at this time of the year you can normally hear the ice in the River Moskva start cracking as the capital emerges from its long deep freeze – also about to be echoed in the car industry in this most economically challenging of countries?
After months of sustained falls in the price of a barrel of oil, this week crude crept up past the US$40 mark and added a penny a litre at my local garage to boot while, after an unremitting battering, the ruble is slowly edging back up again.
These are tiny green shoots and who knows if they are a blip or a herald of more than just spring optimism but Russia, still subject to tough international sanctions as the west continues to vent its opprobrium for the Kremlin’s annexation of Crimea and what it perceives to be involvement in eastern Ukraine, is still there under its indefatigable president, Vladimir Putin.
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By GlobalDataHow ironic then in this of all weeks, it appears as if AvtoVAZ CEO, Bo Andersson, has had to carry the can for an extraordinarily difficult set of sales numbers which saw the Togliatti-based Lada manufacturer post a 2015 operating loss of RUB24.7bn (US$351m), more than double the RUB10bn loss booked in 2014.
The Swedish Andersson – with a CV which includes 20 years as General Motors’ purchasing supremo and as CEO at GAZ where he successfully introduced western style business practices – appears to have ruffled quite a few feathers in Togliatti and beyond with his insistence on massively downsizing AvtoVAZ’s workforce and focusing on hoisting the quality of Russian component makers and, if not, using overseas suppliers to fill the gap.
Realistically, it is hard to see what else Andersson could have done but a foreigner striding in to rule the roost with his very firm idea of what should be done could well have irked quite a few people east of the Urals.
One of Andersson’s last radical acts was to introduce a four-day working week with a resultant 20% pay cut – never a popular measure and there are murmurings some at Russian shareholder Rostec are unhappy at the scale of his surgery.
Of equal interest will be what the Renault-Nissan Alliance, which has a majority stake in Alliance Rostec Auto, a holding company that controls AvtoVAZ, will do now. AvtoVAZ production volume of Lada, Renault, Nissan and Datsun brands plunged 19% to 460,000 units last year but this gloom and doom reflects a calamitous market, enduring unprecedented economic headwinds.
With a a sharply declining ruble, Russians aren’t exactly rushing into showrooms while high interest rates and inflation are also contributing to the general uncertainty.
So Andersson may have taken some succor from comments made to me by EURussia managing partner, Ivan Bonchev from Moscow from where he notes: “He [Andersson] continued downsizing the company which we agree [was] a necessary step. It is definitely one of the factors [about which people have expressed opinion], which has made certain groups of people unhappy.
“He has had some significant achievements. Objectively, at this point of him being released, you would not say he has negatively performed against all KPIs and he has managed to stir the culture at AvtoVAZ in a very positive way.
“Nevertheless, in the first place, he did not meet his KPIs and whoever is [measured] against KPIs, the task has not been performed.”
The Moscow analyst praised however, Andersson’s willingness to tackle the quality of some of Russia’s supplier base, insisting on raising standards, given his history as purchasing manager at General Motors.
This may or not have raised hackles with some in the supply chain but Russia is almost uniquely poised to take advantage of a rock bottom rouble which has swiftly made domestic component manufacturers extremely competitive.
“Another positive aspect I would assess has been he has replaced certain so-called quasi-Russian suppliers that have repacked Chinese supplier parts …and labeled them as made in Russia,” added Bonchev.
“Of course, Andersson is very experienced in terms of purchasing. I am pretty sure he has made strong efforts to change the supply chain.”
Was Andersson just hugely unlucky to be at the helm of such a massive Russian brand in the teeth of one of the worst economic storms to batter the country in decades?
His insistence on implementing western-style working practices may have won him few friends but was surely essential in shoring up the company and providing a profitable basis with which his successor, whoever he may be, to work.
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