AvtoVAZ Chairman Bo Andersson is fighting back against suppliers he says are hindering his efforts to improve quality and cut purchasing costs at Lada, Russia’s best-selling car brand.
AvtoVAZ resumed production today at its car assembly lines in Togliatti after output was suspended on Monday because of problems with the supply of parts.
It’s the second time the automaker has been forced halt production because of supply glitches. AvtoVAZ shut down assembly lines in November after some suppliers refused to send parts.
Andersson talked about the automaker’s supplier problems at the Automotive News Europe Congress in Birmingham, England, on June 10. “They shut me down,” he said of the November stoppage. He is confronting suppliers whose working methods date back to the Soviet era. “They have been used to special benefits,” he said.
The former General Motors purchasing boss is AvtoVAZ’s first non-Russian CEO. He said executives from 15 suppliers complained to the Russia President Vladimir Putin about his tough stance. “I think that was their mistake,” he told the ANE conference. In November, the supply of parts resumed after the government backed Andersson.
“They are working to my terms now: I want five things from them: quality parts, delivery, service, competitive pricing and terms of payment,” he said.
Andersson is cutting jobs in addition to reducing purchasing costs in a bid to make AvtoVAZ profitable. The company posted a net loss of 25.4 billion rubles ($384.67 million) last year.
He said he has no plans to boost inhouse parts production at the automaker, which is controlled by Renault-Nissan. The Lada models built in Togliatti have 81 percent local content. Renault, Nissan and Datsun vehicles built at the factory have about 50 percent local content.
“I don't want to in-source for the sake of in-sourcing,” he said. “We are focusing on where we can be competitive, on stamping parts and plastic parts.”
Andersson has hired 100 purchasing staff as AvtoVAZ seeks to source more local parts for Togliatti-built Renault and Nissan cars to counter the collapse of the ruble. “In the Russian market today it's all about local content,” he said. “If you have your cost structure selling in rubles, you have a huge advantage. If you have 15 percent of cost in rubles and the rest in euros or dollars you're dead.”
Andersson has cut 17,000 jobs at AvtoVAZ since he was appointed CEO in 2013 but he has now stopped the staffing reduction. “This year I can only take one war so I said I would take on the suppliers,” he said.
Last year AvtoVAZ Chief Financial Officer Evgeny Belinin told reporters that some suppliers hurt AvtoVAZ financially by holding a monopoly on a supply of components or by rigging bid-tendering for new work.