AvtoVAZ says it is looking to the success of airline, Aeroflot, as a benchmark to improve its image and change consumer perception of its products.
Once a byword for inefficiency, the Russian flag carrier has transformed itself into a profitable, safe and reliable airline with an emphasis on customer service, a tag its carmaking counterpart wishes to emulate.
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Despite being the leading automaker in Russia with the Lada Granta being the number one selling vehicle in the country, the manufacturer has endured three years of losses in an overall market currently enduring falling sales, but is looking to up its share from 16.5% to 20%.
“Many Russian brands have been rebranded,” said AvtoVAZ CFO, Evgeny Belinin, at the automaker’s plant in Togliatti. “Talking about different Russian brands, there are many good examples, for example Aeroflot, which went from a typical Soviet-style company, which did not care about the customer [to] becoming one of the most recognised brands in Russia.
“Our task is also to have a success story like that. We very quickly started to change the company and improve our products and decided on cost reductions.
“But the key thing we need to work on is the perception of our products in front of customers. Without a great product, perception is nothing.”
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By GlobalDataThe CFO said AvtoVAZ was targeting an end to losses this year – a point echoed by relatively new CEO Bo Andersson who commented to just-auto: “This year we must – we will – break even.”
Andersson’s arrival has coincided with a drastically falling market in Russia as its political leaders square up to the West concerning tensions in Ukraine and as consumer confidence – fuelled by high interest rates and economic uncertainty – is increasingly spooked.
“We target to break even in 2014, which would be a huge achievement,” said Belinin. “However, with volume falling down with the market and with many kind [s] of surprises…it is becoming a really challenging exercise.
“AvtoVAZ is famous for its losses. In order for that not to happen, we have a few key things to do this year. Our task this year is to have a 2% price reduction, saving of logistics, energy and maintenance [for example].”
Part of AvtoVAZ’s strategy to stem losses has been to embark on a colossal headcount reduction with the blood-letting seeing staff numbers plummet from 106,000 in 2009 to an estimated 53,000 by the end of this year.
Further cuts could also see worker numbers fall yet further to around 30,000 by the end of the decade.
“As a typical Soviet company as we used to be, we had white collar labour more than direct workers,” said Belinin. “Our priority is to reduce this significantly.”
Should any upturn occur, Togliatti on its vast 675 hectare site, would easily absorb any extra capacity needed as it is currently under-utilised.
That capacity could also focus on any export-led initiatives as the automaker presently only ships less than 10% of its total sales outside Russia.
Aeroflot is now official partner to English football club, Manchester United.
