100 days at AvtoVAZ

100 days at AvtoVAZ

 

In January one of the major automobile producing company, AvtoVAZ, was headed up by a foreigner, the case is unprecedented. The major of the Swedish army, ex top-manager of General Motors, Bo Andersson has been ruling the GAZ group for four and a half years. During this period the company succeeded to improve its economic state considerably. Compare RUR 8.8 billion of profit in 2012 to 10 billion of loss in 2009. Now Renault-Nissan alliance, which controls AvtoVAZ together with Rostec, asks Andersson to perform the miracle second time and turn the company into a profitable international producer.

In his interview for RBK Daily Bo Andersson told us what he had managed to do during 100 days spent working on AvtoVAZ, 97 of which passed in Togliatti.

During the last year AvtoVAZ suffered from RUR 8 billion damages. The Russian market is in decline, in the first quarter it decreased by 2%. But the enterprise is not hopeless yet, as Bo Andersson assures, being ready to revive the Russian icon.

AvtoVAZ is the Russian icon, a symbol. And we want to do the same Aeroflot managed to do

Bo Andersson, Chief Executive Officer of AvtoVAZ

- You’ve been heading AvtoVAZ just for three months. What can you already say about the work of the factory, what are your main impressions?

- The main impression was left by Togliatti’s citizens who are ready to work three shifts one by one. That is not the case for the other Russian factories. As for our aims, the short-term one is to provide profitability. In the next four years we are planning to restore our market share and achieve positive cash flow being on operational profitability of 6%.

- What were your first steps after coming to AvtoVAZ? Your first order?

- I visited the production departments first. I entered several lavatories and found out they were dirty, some being out of use. And I said: “Today you focus on one thing – on the lavatories. Make them usable for people.”

I control the production departments about two or three hours daily. Every morning at 7 a.m. I lead conferences with top-managers right near the assembly lines and control three indices: volume of production (day plan and real number), quality and prime cost.

- All the motorists are aware of Lada’s low quality. How do you intend to change the situation?

- Usually our buyers choose Lada for three criterions: reasonable price, reasonable quality and possibility to repair it by themselves. But I can agree about the level of quality, and we take measures to improve it. Today we have the next meeting, it is devoted to 14 customers’ complaints. 3 of them are already satisfied, we are working on the next 7, and the rest 4 are in wait.

Everybody in Russia knows Lada and AvtoVAZ. Unfortunately, they are connected with people’s negative experience. In the 1970-s I flew by Aeroflot’s planes and it was also a negative experience, but nowadays this is one of the best airlines. AvtoVAZ is the Russian icon, a symbol. And we want to achieve the same Aeroflot managed to do.

- And what about the suppliers? The quality gets better as soon as component parts are better. What do you undertake for improvement of production base?

- We set the new record last week by producing 2,200 automobiles 5 days in a row, 600 of which are designated for the alliance’s partners. Without the solid supplier base we wouldn’t have achieved such results. Indeed, we needed a descent quality of component parts. We have developed a special program – each of our top-managers including me works with our suppliers, this is not only the procurement managers’ task. Every day at 7 p.m. I meet four top-managers and start analyzing their reports. Honestly, I am impressed by the fact that legal experts, financiers and engineers have their own view of the company.

- How do you evaluate the recent state of Russian auto market?

- Yes, by looking at the market you can say the situation is really complicated. Optimists predict that during the next one-two years market will stay at the same level, while pessimistic forecast is a 20% drop. We expect only 5-10% decline. Today we need to ensure that we really make good quality cars and stay competitive.

- How can ruble collapse and economic slow-down affect AvtoVAZ?

- From one point of view I have nothing against the weak positions of ruble as far as 70% of our costs are paid in this currency. But, being a businessman, I am concerned about the people’s future, because buying a new car is the last they do staying in such a situation. But our positions are much stronger than the rivals’ ones, because, as I’ve already mentioned, our costs are covered by rubles mainly and we use it. Economic slow-down does not let us hope for immense development, but we will accommodate, I think.

- Do you expect Russian government’s support? For instance, the utilization of automation program or credit subsidies?

- I am both an optimist and realist. So nowadays I do not expect from the government anything more than just a moral support.

- One of your cut costs program’s point is hemorrhage of jobs. How many people have already been fired and how many are going to be dismissed soon?

- I have been working on AvtoVAZ just for 100 days while the enterprise has been losing money the last two years. Now the major task is to care about those who stayed on the factory, so we do not employ new people. We had to reduce the staff by 20%, including managers, specialists and workers. Some of managers used the reciprocal discharge agreement. We provided them with compensation at the rate of 3-5 month salaries during the period from February to April. As for the workers of pre-retirement age, they had an opportunity to retire beforehand. The hemorrhage of jobs took place due to the natural loss. Of course, this situation is rather unpleasant and dramatic for somebody, but we play by the rules. Now we need to provide those who stayed with labor stability.

- Will the AvtoVAZ’s shareholders, Renault-Nissan alliance, load production facilities with new models?

- The shareholders keep the right to make proposals on the meetings of the board of directors, and this is where they can be most helpful. Renault, Nissan and now Datsum are our clients and suppliers. But we shouldn’t mix these terms. Shareholders have their own rights, but as for production sphere, here they stay our clients and suppliers.

We are planning to produce 150 thousand cars for the Renault-Nissan alliance this year. It helps us a lot, particularly in modernization of production – a lot of new equipment was purchased. That is why we can reach the quality at the world level.

- You used to be the top-manager of General Motors, a huge American company, and now you rule one of the biggest Russian enterprises. Is there some dramatic difference, what has changed in your work?

 - I don’t see any principal differences. I like working in Russia because there are good people here. While being on AvtoVAZ I have five major tasks. The first is to care about the people, employers are extremely important for me. The second – I give people the hope they need. It is sad that many inhabitants of Togliatti are quite pessimistic, and I try not to lose spirit. The third – I define the direction. The fourth – I distribute the staff and financial resources. It is worth mentioning that AvtoVAZ is highly bureaucratic, so I write all the orders down in my notebook. That is why the fifth task is to control the fulfillment of all the plans. Here you need check everything ten times more attentively than in the USA. It is disrespectful to pose tasks and not to control their implementation.

- You have been living and working in Russia for several years. How do you feel now, when the political situation is quite tense? Are you afraid of any Europe’s and USA’s sanctions?

- First of all, I am a businessman; secondly, I’m not afraid of anything. And the third, I haven’t been living in the native country for 22 years. The most important for us here is to make the enterprise and the production better, to help people start producing the high-quality stuff. As for politics, it does not bother me.

- When we will see the new Lada?

- Presumably in 500 days. In this September we are launching the production of Lada Vesta. That will be a great car for Russian conditions. It has modern design, being comfortable and safe. The average price is 400 thousand rubles.

The most important issue is to start its production on time. That is why, starting from this Monday, I check the course of the project every day. Usually they start being late right at the beginning. During the next three years we announce and produce five other models of Lada which are similar to Vesta. The production base is different, but the design is almost the same.

- Do the Renault-Nissan’s engineers help working on Lada models?

- We have a very solid engineering base at AvtoVAZ, and most of the work is done by our people. We use some of Renault-Nissan’s components, but the alliance’s employers do their job. Thus, for instance, Nissan’s staff is concerned with the production of Almera, while Logan is Renault’s project. And it makes sense, I think.

- And as for the further future, what will AvtoVAZ be like in the next ten years?

- Primarily, we should be a good factory with a high level of quality standards; secondly, we should sustain the volumes of production. For instance, last year we produced 220 cars per one employee. This year we plan to increase this number twice. This way we double the volumes of production, and that gives us superiority and gets us back to the former level of capacity. Secondly, we launch four new models for the alliance and, thirdly, five new models for ourselves. Therefore, in case of success during the following five years the factory may reach the volume of 3,500 cars produced daily.

- In your opinion, what is the main problem of the Russian auto market?

- This is a very competitive market. Being the consumers, we can choose out of 550 automobiles, 80% of which are produced here. I love concurrence, being at the same time afraid of it. Many people get back to Lada, and that means much. We want to demonstrate that the cars made by the Russians and oriented to the Russians are of good quality, affordable and easy to repair.

- What was your main demand for the shareholders when you were invited on AvtoVAZ?

- I didn’t search for this job. My only condition was the implementation of 100% of work made by myself, a very complicated man. But if you want to take 1% of my job, you may take the rest 99%.

- How long are you planning to stay on this place? When can you say that you did everything you could for AvtoVAZ?

- This is a large-scale task and we have a certain plan. I cannot make it all by myself, we develop a strong crew. I would say that in five years it must be a great team, then I can move on and do something else. GAZ was not completed for 100%, so I’m very proud of having prepared a very good team. As you can see, GAZ has created and launched seven new automobiles during the last three years, so now they are quite successful.

- Have you invited anyone from your last place?

- No. I have a simple rule: people from GAZ should stay on GAZ. Furthermore, although I am a foreigner, I sent half of foreigners home because their labor is quite expensive. Moreover, Russian managers start being relaxed, thinking that these foreigners will do everything for them. When I headed GAZ we had only three foreign workers, while the rest were the Russians.

- Have you had any problems in communication with them?

- I learnt the Russian language at school in the 70-s, so I comprehend it. I can read and write. But I have so many problems requiring the solution that the language is not of top priority for me, although it’s much easier when you understand the language.

Bo Inge Andersson was born on October 16, 1955. In 1978 he graduated from the Military Academy Karlberg, then served in the armed forces and reached the major’s rank. In 1984 he graduated from Stockholm University as a specialist of business and administration, in 1999 accomplished education in Harvard Business School. From 1987 to 1993 he worked as a vice-president of Saab Automobile’s purchases. 1993-2009 – General Motors. Until 1997 – executive director of international electrical engineering purchases: 1997-1999 – vice-president in charge of European purchases; 1999-2001 – manager of international purchases. 2001-2009 – vice-president of the group in charge of purchase and development of provider base; member of strategic counsel of automobile GM movement, counsel for production of GM automobile movement and of strategic counsel of GM movement in the Northern America. Then – the Head of the board of the directors and the Director General of GAZ. Positioned as CEO of AvtoVAZ on November 5, 2013.

Source: RBC Daily