AvtoVAZ CEO Bo Andersson aims to restore pride to Lada

Andersson: "We can learn tried-and-tested principles of automobile production from General Motors" Photo credit: Bloomberg

Bo Andersson, a former top purchasing manager at General Motors, is the first non-Russian CEO of AvtoVAZ, which is now controlled by Renault-Nissan. Andersson, a Swedish national, is tasked with turning around AvtoVAZ's struggling Lada unit, whose sales have been hit hard by competition from Western brands. He spoke with Automobilwoche, a sister publication of Automotive News Europe.

How are tensions between Russia and the Ukraine affecting Lada.

Russia is our biggest market, not the Ukraine. Political instability doesn’t necessarily make our business any easier. On the other hand, a certain nationalism benefits us at Lada. And the weaker ruble helps us since Lada sources three quarters of its components from this currency zone.

How important are Germany and the rest of Europe to Lada’s business?

Germany is a very interesting market, but we do not have the right products for it yet. Our exports are now focused on Kazakhstan, the Ukraine, Azerbaijan and Belarus. We are also quite strong in Egypt and Tunisia, along with Peru and Nicaragua. We want to grow strongly in Europe with the new models I just mentioned.

You want to boost Lada's market share in Russia to 20 percent by 2016 – how do you expect to succeed in a difficult economic environment?

Last year, our market share was 16 percent, and for the first half we are already at more than 17 percent. We are working on three core themes for future growth. First, we are improving the quality of our current models. Second, we will soon bringing out interesting derivatives of these models, such as a crossover version of the Kalina. And we are introducing three entirely new cars starting in September 2015.

What new cars are coming?

We are planning B-segment sedan: The new Vesta is Lada’s own development. It will meet European safety standards, will be capable of meeting the Euro 6 standards, and have a base price of 8,000 euros. We will also have the X-Ray SUV and the all-wheel-drive Lada X-Ray crossover. Both are based on Renault platforms and will offer impressively low fuel consumption, among other things.

Does Renault-Nissan want to increase its share in AvtoVAZ?

Renault-Nissan and the Russian government already own 74.51 percent of AvtoVAZ, in the form of the Netherlands-based Rostec Auto BV alliance. As far as anything else goes, the future will tell.

How will you increase profit margin to 6 percent in two years?

We unfortunately lost money over the last two years. That is why we are working hard on our fixed, material and administrative costs, which are too high. Our production volume is still too low. In 2013, we sold 530,000 cars worldwide. And Lada can still configure its pricing even more attractively in comparison with the competition.

Are you satisfied with Russian suppliers and their local value creation?

Yes and no. On one hand, Russia now has many high-performing suppliers. On the other hand, AvtoVAZ is too dependent on some monopolies. That is why I want to create more transparency and competition in supplier relations. For example, we could economically import certain auto parts from Turkey in the future.

What other automakers does Lada consider to be its benchmarks?

We can learn tried-and-tested principles of automobile production from General Motors. During my time at the GAZ Group, Volkswagen showed me that the Germans lead in engineering, in body stiffness, for example. Renault can help us in the engine and drivetrain area. In turn, Nissan stands for high quality. We are paying extremely close attention to the best concepts in each case.

What are your first successes?

We have focused on production during my first five months at Lada. We were able to reduce the hierarchical levels from nine to five. We have improved productivity by 25 percent and have increased our quality by 20 percent. In Togliatti, we build 2,400 cars a day – the figure should reach 3,000 by year’s end.

How important are alternative powertrains?

Lada can already point to successes in electric vehicles, and if we needed more from the technology – Nissan is the world’s leading company in this field. CNG and LPG engines are becoming increasingly important in the Russian market. Lada is very deeply involved with gas powertrains.

Does Lada need to develop in the growth markets of Brazil, India and China?

Not in the near future. We would rather focus on 10 core markets where we can be competitive. Our products are the key. We need to be somewhat stronger in Sweden, Norway and Finland, where the climatic conditions resemble those in Russian and many roads require four-wheel drive.

The Lada X-Ray concept previews the brand's new design.

In two years, which automakers will be among Lada’s toughest competitors?

I am convinced that we have to steel ourselves for intense competition from Chinese companies. Geely is already quite successful in Russia. Lifan as well. And we will naturally continue to compete aggressively against VW and GM.

What projects would you like to advance in the next six months and what is looming in fiscal year 2015?

First of all, I would like to bring pride back to Lada. We have many good employees who want to enjoy greater success in the auto business. As I mentioned, we are aiming for a 20 percent market share, a 6 percent profit margin and a positive cash flow in 2016. We will continue to hone our cost structures. And in the future, with all our body derivatives and powertrains, we will present something new every three months. The models do not need to represent large volumes. But they will be visually and technologically appealing. The Lada Kalina Cross, which is being launched in September, is one example. We expect people to say: 'Yes, it’s only a Lada.' But they should be very proud of it at the same time.

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