AO AvtoVAZ of Russia, the biggest carmaker in Eastern Europe, accepted resignations of two key members of its board of directors yesterday, marking the first major departures of the company’s ‘old guard’, sources told just-auto.com.


The exits follow recent efforts by AvtoVAZ to remake its image into a market-oriented enterprise shedding Communist-era practices to focus on shareholder value. The automaker still must prove its commitment to reform, but the traded value of its ordinary stock has soared from $0.09 in June 1999 to nearly $20 this month, and AvtoVAZ is increasingly confident about its prospects for attracting foreign investment and loans.


At an extraordinary board meeting at company headquarters in Tolyatti, Aleksei Nikolaev said he would step down as president-general director, while Nikolai Lyachenkov announced he would quit as first vice-president and first deputy general director, said industry watchers apprised of the meeting.


Both executives, employed at AvtoVAZ since it started making Lada-brand cars in 1970, have been viewed increasingly as inadequate to the tasks of modernising the company.


Analysts see further turnover of senior management. “Other resignations will follow,” one observer said. “The company must yield to the fresh ideas of its younger leaders.”


Vladimir Kadannikov, chair of AvtoVAZ’s board, also has been at the automaker from the beginning, but he is seen to represent the company’s new generation of executives, and his power within AvtoVAZ likely will strengthen.


Vitali Vilchik, AvtoVAZ first vice-president for corporate governance and strategy, was tapped to succeed Nikolaev. Yuri Stepanov, the company’s vice-president for personnel, is expected to assume the responsibilities of Lyachenkov and Vilchik.

“The promotions of Stepanov and Vilchik will lead to major improvements in AvtoVAZ’s business planning methodology, control systems and transparency,” said a source close to the company.


The departure of Nikolaev, who turned 66 yesterday, has been expected (some insiders even anticipated him retiring at the automaker’s annual general meeting last year). But the resignation of Lyachenkov surprised observers, as he has remained active in the company.


The management changes, effective immediately, are to be approved at AvtoVAZ’s shareholders meeting in May. Nikolaev is slated to stay on the board, but any future role for Lyachenkov remained unclear yesterday.


Last June, AvtoVAZ agreed a $340m venture with General Motors Corp to make a modified version of its new sport-utility vehicle Lada Niva 2123 under GM’s Chevrolet badge. GM-AvtoVAZ ZAO, owned 41.5% by each automaker plus 17% by European Bank for Reconstruction and Development, is scheduled to launch output 23 September 2002 with plans to make 75,000 vehicles a year by 2004.


AvtoVAZ and the US automaker have discussed other cooperation, including: GM’s German unit Adam Opel AG outsourcing engineering to the Russian company; and jointly building more models (possibly AvtoVAZ’s planned small Calina and Opel’s current mid-sized Astra).


GM also has shown discreet interest in taking equity in AvtoVAZ. “We would like to grow relations with AvtoVAZ in mutually beneficial ways – and see where that takes us,” David Herman, GM vice president responsible for Russia, told just-auto.com in August 2001. “If AvtoVAZ evolves so a foreign manufacturer can buy a stake in it, GM would like to have the opportunity to be first.”


This week, GM iterated this view, and Kadannikov said AvtoVAZ has become better positioned to seek foreign investment since the Russian government freed AvtoVAZ in December 2001 from an obligation to pledge 50% of its equity against its tax arrears, according to Reuters.


“All these changes make it easier for GM to expand its relationship with AvtoVAZ,” a source said.


Ryan James Tutak, associate editor of just-auto.com for Eastern Europe