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August 28, 2014

RUSSIA: AvtoVAZ to break even this year: Bo Andersson

AvtoVAZ says it will likely increase revenue 50% by 2017 as a raft of productivity and management improvement levels take their cumulative effect with break-even forecast this year.

AvtoVAZ says it will likely increase revenue 50% by 2017 as a raft of productivity and management improvement levels take their cumulative effect with break-even forecast this year.

The Lada-producing giant is feeling the after effects – in tandem with much of Russian auto industry – of the current political turmoil which has pitted Moscow against Western capitals and only last week saw AvtoVAZ announce a 25,000 unit reduction against three years of losses.

“In 2017 this will be a rather larger business and if we are successful, revenue will be 50% or 100% larger,” AvtoVAZ CEO Bo Andersson, told just-auto on the sidelines of the Moscow Motor Show.

“I would [say] 50% is more realistic. I have no patience. The only way to build that pride in Lada [for example] is to do what you say, second you need products and third people.

“I was surprised when I came to AvtoVAZ – I saw the plants and saw a lot of powerpoints – but what you see today is execution. In January the management team had nine layers – today we have five. The managers report every morning for three minutes – on an average day we produce 2,700 vehicles.”

Andersson’s whirlwind entry into AvtoVAZ – following his period at the helm of fellow-Russian producer GAZ Group – has seen the new CEO bring many management changes but he insists his approach is based on urgency not personal reward.

“I have been at AvtoVAZ seven months,” he said. “I live in [headquarters] Togliatti – I work seven days a week – not because I like to but because we have no time.

“We have extremely good workers – we have good management but they must be held accountable – they must be challenged.

“If I am very honest, GAZ had the benefit to fix the old issues in 2009. We were successful in executing nine new products. At AvtoVAZ, we as a team, we are fixing yesterday’s issues. Some issues are 20 years old, such as windshield leakages.

As part of the readjustment programme, Andersson revealed on top of a previous 50,000 unit production cut, he had ordered a further 25,000 reduction in order to address surplus inventory, while workers were being “trained” on other tasks instead of being sent home.

The AvtoVAZ chief also noted while assembly operations had returned 20 vehicles per person per year in 2013, the automaker was on course to double that in 2014, although “to be competitive” the figure needed to rise to 60.

Much speculation at the Moscow show has centred on any possible sanctions the Russian government might impose on automotive importers into the country, but Andersson treads a diplomatic line.

“In automotive, the government has been very responsible,” he said. “They have had different discussions with OEMs – it is their decision what to do.

“Most of our issues we need to solve ourselves.

“This company has lost money for three years – our mid-term targets are very clear – 20% market share.

“This year we must – we will – break even – that will be sustainable.”

Andersson also enjoys cordial relations with the government in what are challenging times for Russian companies – and the politicians in Moscow.

“Most of them know me,” he said.

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