VLADIMIR V. KADANNIKOV was president of AvtoVAZ before serving for a year as a minister in Russia's government. He returned to AvtoVAZ this year as chairman. He was interviewed in his wll-protected office in central Moscow by reporter Knut Moberg.
What is the current situation on your joint venture with Opel?
We are in the final stage. I believe that there is an 80-90 percent chance for an agreement. We have managed to overcome a large number of things, and I see now two main problems: financing the project and the price of the car on the Russian market. We have a goal to finish before 1 April 1998. The main problem is financing the AvtoVAZ part of the investment. But I also hope this can be solved.
Is Valmet out of the talks?
It is still included, but at a lower level than before. Valmet has enough problems with producing cars in Finland, and I believe it has limited capacity to be an important partner in an agreement to produce Opel cars in Russia.
What is the program for the Opel joint venture?
The project has three phases. It will start with an assembly plant for 50,000 cars in Russia. The car we will produce will be based on an Opel platform (Astra or Vectra), but we have not yet decided if the car will be called an Opel or a Lada.
Step two will be much larger production of cars. Here we are looking at several hundred thousand cars a year.
The last project - but not the least important - is an engine plant for 300,000 engines a year. The engine will be 1.8- and 2.0-liters and will be used in many cars made in Russia. We will export parts and possibly also engines back to Opel. The engines will have an Opel design.
Will the Opel cars be exported?
No, the cars will be sold in Russia and in the new independent states. They will be sold through the Lada network. Opel is also eager to build its own dealer network in Russia. I see a future where two cars are made - one Opel and one Lada.
Will the possible new plant be close to Finland or close to Lada in Togliatti?
This is not decided, but I believe there is more chance that the plant will be close to Togliatti.
If you do not come to an agreement with GM, do you have other possible partners?
As long as we talk with Opel and GM, we are not talking with any others. But I must admit that we have received interesting signals from several other large car companies, including Daewoo and Honda.
Do you have new models?
We have cars ready. I can tell you that we have a totally new program for Niva cars. We have all variants from pickup to minivan with four-wheel drive, but we need to invest $300 million to start production. We have a series of new Lada cars, but again the financial problem is the key.
Your car exports have fallen. Why?
Before 1993 we exported 300,000 cars a year. This year we will end on 110,000 and next year we will decrease again, maybe down to 65,000.
In 1993 we had a profit on exported cars of 300 percent. Now we are not making any money on export, more the opposite. The main reasons are changes in exchange rates for rubles. With our cars we have not been able to increase prices in export markets. AvtoVAZ is a Russian producer and will be more dependent on the Russian market.
Renault, Fiat, Volkswagen, Hyundai, Daewoo and Toyota are all looking at producing cars in Russia, as well as Opel. Are you afraid that there will be too many producers?
No. We will not have the same problems as China. The car market in Russia will increase and I believe it will grow a lot. We have had difficult times, and still have. But the interest in cars is very large, and I see no reason why we should not see fast growth. Producing cars in Russia is a question of large numbers. Only the big will survive.
Are you satisfied with the government's interest in the Russian car industry?
Who is satisfied with any government? We are in talks with several ministers. I cannot hide that we have some problems with tax and debt, but I do hope that we will be able to come to a positive agreement. AvtoVAZ has for years been a key player in Russian industry, and will be in the future. We are used to solving problems. I often feel that we do that 24 hours a day, 365 days a year.
Our goal is to produce 739,000 Lada and Niva cars next year. This year we will make 731,000 cars. An agreement with Opel/GM will add more cars.
I am a car man and have worked with cars for more than 40 years. The only time I was out of cars was the time I was a minister in Russia. I joined AvtoVAZ in 1967, so I am one of the pioneers who has been with the company since the beginning.
When do you see the start of manufacturing?
I would like to see a start at the very end of 1998. But I must again stress that we have not made any final agreement with Opel or GM. I am very happy with the talks we have. Several studies have been done and the groups work nicely together.
I am optimistic, but I understand very well that Opel and GM want to take time. Russia is not a market where you can play. And if we make a joint venture, it will be a long-lasting cooperation between the largest automobile producer in the world and the largest in Russia. We have for years had an agreement with GM for some parts for engines for our Lada cars. And we know our partner very well.