AvtoVAZ CEO, Bo Andersson, concedes the scale of the redundancies he is implementing is “difficult,” but points to already vastly improving productivity levels among the workforce at the automaker’s Togliatti plant 520 miles South East of Moscow.
The Russian giant – now controlled 50.1% by the Renault-Nissan alliance – has posted losses for three years but Andersson – fresh from his time at GAZ Group – is confident drastic pruning and cost reduction will see the manufacturer break even this year.
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The scale of the job cuts is immense with headcount plunging from 106,000 in 2009 to 53,000 by the close of this year and a potential target of 30,000 employees by decade-end.
“Job cuts are always difficult,” Andersson told just-auto on the sidelines of the Moscow Motor Show. “What we need to do is enhance our management structure and take out bureaucracy.
“This company has lost money for three years – our targets are very clear – 20% market share.”
Andersson emphasised the importance the alliance is playing in AvtoVAZ’s quest for profitability and highlighted the key role of suppliers in driving more localisation, incentivised by the Russian government’s Decree 166 mandating domestic component content.
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By GlobalData“The most important thing for AvtoVAZ is to have the right components at the right cost,” said Andersson. “We have the huge advantage, we are part of the Renault-Nissan alliance. The trick is to see where do you need to have unique parts and a mix. We buy all the steel together with the alliance [for example].
“We need to do much better communication with our suppliers. I expect 100% cost transparency – some of them give it to me – some of them don’t.
“Today at AvtoVAZ we have 81% localisation – we work on it together with the alliance. AvtoVAZ must be competitive and show we can give benefits to Renault. Russia is the largest territory in the world – for the alliance it is a strategic [market].”
AvtoVAZ works with suppliers in different ways, with Andersson citing co-operation with component producers in the guise of TRW and Autoliv, while also working with what he refers to as “global local” manufacturers such as Takata in Russia.
Others such as Plastic Omnium, have joint ventures with domestic operators, while “local local” suppliers are also present on the market.
“As a Swedish guy, I would say government has done a very good job with [Decree] 166,” said Andersson.”
The vast redundancies at AvtoVAZ do not appear to have provoked strong union reaction in the way they might do in the West, with the automaker keen to stress it has cut “in accordance with the legislation of the Russian Federation” as noted by the manufacturer’s VP human resources and social policy, Dmitry Mikhalenko.
“The only way to to be successful in Russia is to take care of the people,” Andersson added to just-auto.
The AvtoVAZ CEO said his workforce was currently producing vehicles at the rate of 40 per person per year – already up from 20 – but to be competitive that figure needed to rise to 60.
