Russia: AvtoVAZ mulls return to profit amid slumping market image

Russia’s largest automaker, now under the control of the Renault-Nissan alliance, has vowed to return to profit through cost cutting measures and the introduction of new models to regain critical market share.

The producer of Lada brand vehicles has been continually loosing market share since the Iron Curtain fell and the Soviet Union’s days came to an end. But Bo Andersson, the new chief executive officer – set in place by the European stakeholder – has the ambitions as high as ever. He’s streamlining management levels and introducing production efficiency strategies to lower operating costs. There are also job cuts, of course – but Andersson claims the ailing carmaker can reach its target to break even before the end of the year.

“We will make maximum use of the benefits of the alliance,” said Andersson on the sidelines of the Moscow auto show. “We must be much more competitive. We’re making the management lean, the overall structure lean,” he added. “We need to cut unnecessary bureaucracy.”

“There’s so much negativity over AvtoVAZ, but over time it might turn out to be a pretty good asset,” said Arndt Ellinghorst, a London-based analyst at Evercore ISI Institutional Equities. “Andersson is leaving no stone unturned. He’s probably one of the toughest turnaround managers in the industry.”

The automaker has set the goal of reaching an operating profit of 6% from revenue by 2016. For that, the CEO said the company plans to refresh its line-up of models while also taking advantage of the possibility to source many components from the French and Japanese partners.

Via Automotive News Europe