AvtoVAZ says it could generate a “couple of billion Roubles” in parts sales if it further leveraged its expertise in component manufacture.
The Russian automaker made the comments as it also looks to attract multiple bids for parts arriving externally, rather than a monopolistic situation that discourages competition.
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“We have component production and are not selling a lot of components outside the company, but with the [capacity] we have, we could sell a couple of billion Roubles easily to the market,” said AvtoVAZ CFO, Evgeny Belinin, at the AvtoVAZ Togliatti plant in Samara.
“We could make extra hundreds of millions of Roubles of profit. Extra production should mean extra profit.”
The CFO also addressed the thorny issue of a lack of external component supply, whereby a single producer would sometimes tender, instead of several potential partners.
“Some time ago, AvtoVAZ created a lot of problems by itself by outsourcing very large elements to the companies which proved not very reliable,” said Belinin.
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By GlobalData“Some those companies are practically monopolistic suppliers – if you have issues you are in trouble.
“We need to have two, three, four suppliers who are bidding for the thing. Currently, that is not the case.”
AvtoVAZ is looking for a 2% reduction in its cost structure in areas such as logistics and maintenance, with a view to breaking even this year after previous losses.
“We target 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% reduction in prices. Saving [in] logistics and maintenance [for example].”
As part of the drive to efficiency, AvtoVAZ will continue to reduce headcount, reaching a possible staffing level of just 30,000 by 2020 compared to the 106,000 at the Togliatti plant in 2009.
“As a typical Soviet company as we used to be, we had white collar labour, more than direct workers,” said Belinin.
“One priority is to reduce this significantly and we say 35% white collar [staff] should be reduced including 50% at manager level.
“AvtoVAZ is really changing. Not all employees are understanding the need for fast change, so we are experiencing a big turnaround in the management and in the organisation itself.”
