Ukraine crisis makes Andersson's turnaround of AvtoVAZ tougher

Andersson: Challenged by Crimea crisis

MOSCOW -- Bo Andersson, the new CEO of Russia's No.1 carmaker AvtoVAZ, is battling to revive the business amid economic uncertainty caused by the Crimea crisis.

AvtoVAZ, which is due to come under control of Renault-Nissan this year, slumped to a loss in 2013, hit by falling sales of its Lada cars. Now the turmoil in the region underlines the task facing Andersson, the former General Motors purchasing boss.

Russia, once poised to overtake Germany as Europe's biggest auto market, had car sales drop 5 percent last year as economic growth faltered, according to industry group AEB.

AEB forecast in January that car sales would fall a more modest 2 percent this year. But that was before Russia's annexation of the Crimea region from Ukraine soured relations with the West and prompted fears its economy could slide into recession.

AvtoVAZ recently appointed Andersson as its chief executive with an assignment to revive its fortunes.

The Swede, who was credited with turning round Russian bus and truck maker Gaz, said in January he would cut 2,500 jobs and lose about the same again through attrition this year to help the business back into profitability.

AvtoVAZ reported a net loss of 7.9 billion rubles, or about $222 million, in 2013, compared with a net profit of $816.5 million in 2012. Sales fell 7 percent to $4.95 billion.

Analysts said the results underscored the task ahead. "Their operating efficiency is quite low and it has been like this for quite a long period," said VTB analyst Vladimir Bespalov of AvtoVAZ's performance.

"Last year was difficult because the markets went down and they had some internal issues related to the ongoing upgrade of their model range," he said.

Renault, which owns 43.4 percent of Nissan, paid $1 billion for an initial 25 percent AvtoVAZ stake in 2008. Under a deal struck in 2012, Renault and its Japanese affiliate are to take joint control of the Russian automaker in 2014.

Renault-Nissan CEO Carlos Ghosn took over as AvtoVAZ chairman in June and as well as hiring Andersson, has sketched out a plan for AvtoVAZ to take the boxy Lada more upmarket.

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