AvtoVAZ's 2013 loss shows scale of turnaround task for Russia's No. 1 automaker

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MOSCOW (Reuters) -- Russia's No. 1 carmaker, AvtoVAZ, slumped to a loss last year, hit by falling sales of its Lada cars, underlining the task facing new CEO Bo Andersson as he battles to revive the business amid economic uncertainty caused by the Crimea crisis.

AvtoVAZ said it made a net loss of 7.9 billion rubles ($222 million) in 2013, compared with a net profit of 29.2 billion rubles in 2012. Sales fell 7 percent to 177 billion rubles.

Once tipped to overtake Germany to become Europe's biggest auto market, Russia saw car sales drop 5 percent last year as economic growth faltered, according to industry group AEB.

AEB forecast in January car sales would fall a more modest 1.6 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, which is due to come under control of Renault-Nissan this year, recently appointed Andersson as its chief executive with a brief 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.

Task ahead

Analysts said Friday's 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.

Lada sales fell last year following a poor reception for new models introduced since 2011: an updated Kalina minicar, Granta subcompact and Largus minivan, which is a rebadged version of Renault's low-cost Logan.

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.

Going upscale

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

"We will focus on resolving the following tasks: labor productivity increase, product quality improvement, launch of new models and cost reduction," Andersson said in a statement on Friday, without providing details.

Andersson said at a conference last week he was holding daily 7am meetings at AvtoVAZ's assembly plants to review production. "The situation was extremely bad and people needed a wake-up call," he said.

VTB's Bespalov said Andersson's track record made him optimistic he could make a difference at AvtoVAZ.

"We expect a significant improvement in AvtoVAZ's performance in the coming couple of years on the back of massive cost optimisation and restructuring under the new CEO," he wrote in a research note.Russia's biggest automaker, AvtoVAZ, fell to a net loss of 7.9 billion rubles ($222 million) in the past year.

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