If Bo Andersson can't run problematic AvtoVAZ, Russia's largest automaker, then who can?
Andersson, a seasoned and tough former General Motors purchasing chief, looked the ideal candidate to turn around the maker of Lada cars when he became AvtoVAZ's first Western CEO at the end of 2013.
But AvtoVAZ's record loss last year and opposition within Russia to Andersson's job cuts and his cull of inefficient suppliers meant that pressure for the former Swedish army officer to step down became too much to withstand for Carlos Ghosn, chairman of AvtoVAZ and CEO of its majority owner Renault-Nissan. Andersson will step down and his successor will be announced on March 15.
Before joining AvtoVAZ, Andersson, 60, had turned around the money losing Russian bus and truck maker GAZ by laying off half the workforce, killing unprofitable vehicle lines and winning contract manufacturing contracts from General Motors and Volkswagen.
He gained admiration for his ruthless approach to corruption, even though he had to hire a bodyguard. "I said to Mr Ghosn that I will do at AvtoVAZ what I did at GAZ," he told me in an interview last year.
But the scale of the job at AutoVAZ was "10 times more difficult," he admitted.
One war at a time
At AvtoVAZ, Andersson immediately set about cutting the workforce and axed 17,000 jobs at the company's sprawling Togliatti plant. In his second year he paused the unpopular job cutting to balance the books in other areas. "I can only take on one war at a time," he said.
His second war was with suppliers and it proved a much tougher battle to win than at GAZ, where he vastly improved the quality and profitability of the Gazelle light van.
AvtoVAZ's suppliers were largely government-owned and "have been used to having special benefits," he said.
Andersson wanted a better service and reduced prices but the suppliers pushed back. They shut down production at Togliatti twice and executives from 15 partsmakers personally complained to Russia's president, Vladimir Putin. Andersson said Putin backed him and production resumed. One Russian newspaper even joked that Andersson would make an excellent back-up president when Putin was out of the country.
Andersson also worked to modernize Lada's aging vehicle range, launching the Vesta subcompact sedan and X-ray subcompact crossover.
But he faced the stiff headwind of the collapse in Russia's car market as western sanctions over Ukraine and falling oil prices sent the country into recession and the ruble into free fall. Overall Russian vehicle sales declined 36 percent to 1.6 million last year, with Lada down 31 percent. The ruble has fallen from around 30 to the dollar to 75 earlier this month.
Ghosn told journalists on the sidelines of last week's Geneva auto show that he didn't blame AvtoVAZ's management for the 2015 loss. "There is no profitable automaker in Russia," he said. "It's a tough job and nobody wants to do it for ever," he said. "There's a certain point in time when your mission is finished and someone has to take [over]."
Forced out
In 2007, Ghosn beat out GM, Fiat and Magna International to be picked as AvtoVAZ’s future partner – a win that seemed good news at the time because analysts forecast big growth in a country with low car ownership and a middle class that was getting wealthier. Ghosn is still betting that the market will recover at a future date.
Renault-Nissan, which owns a combined 67 percent of the holding company that controls AvtoVAZ and Russian state-owned conglomerate Rostec, which owns the remaining 33 percent, have not yet found a successor for Andersson, according to reports.
Andersson was forced out by Rostec Chairman Sergey Chemezov who criticized the Swedish executive for going too far in cutting jobs and axing local suppliers, Fortune said.
Ghosn and Chemezov will have a hard time replacing arguably the world's toughest auto executive.
