By James Marson, Paul Sonne and Jason Chow
MOSCOW--The owners of Russia's largest auto maker, OAO AvtoVAZ,
are preparing to fire the company's Swedish chief executive, who
had been singled out for blame as Russia's struggling economy
pushed the company into steep losses and forced mass layoffs.
AvtoVAZ CEO Bo Andersson will be relieved of his duties at a
board meeting later this month, said Sergei Chemezov, the chief
executive of Rostec, a state-owned defense-and-industrial
conglomerate that owns a 25% stake in AvtoVAZ. Mr. Chemezov said
that the controlling shareholder, an alliance between France's
Renault SA and Japan's Nissan Motor Co., had agreed to the
move.
"Now, we need to change the person," Mr. Chemezov, a friend of
Russian President Vladimir Putin since the 1980s, said in an
interview. "That's all."
Another person familiar with the matter said Mr. Andersson was
expected to be removed within the coming days.
"He's felt like he's been totally caught off guard," said a
person familiar with Mr. Andersson's thinking.
A Renault spokesman declined to comment. An AvtoVAZ spokesman
also declined to comment.
Renault and junior partner Nissan placed a major bet on Russia
when they took a controlling stake in AvtoVAZ in 2014, making
Russia the French company's only significant growth prospect
outside Western Europe.
But Russia's economy is mired in a recession primarily because
of a plunge in the price of its main export, crude oil. High oil
prices under Mr. Putin's rule since 2000 drove a consumer boom that
saw many Russians acquire their first cars. But the ruble has lost
more than half its value against the U.S. dollar in the last two
years, pushing up inflation and slashing consumer spending.
Total car sales slumped 36% to 1.6 million vehicles last year,
according to industry data, and are forecast to fall to 1.3 million
in 2016. Sales of AvtoVAZ's Lada cars were down 31% last year to
269,000 vehicles compared with 2014.
The proposed removal of Mr. Andersson, a former General Motors
Co. executive, comes as Renault and Rostec battle to rescue the
struggling auto maker, which announced it needed a bailout last
month after its net loss nearly tripled last year.
Mr. Chemezov said he disapproved of how Mr. Andersson steered
the company as the economy crumbled, and that the main reason for
firing Mr. Andersson was last year's steep loss.
AvtoVAZ posted a net loss last year of 74 billion rubles ($1.2
billion) and said it needed extra funds from shareholders to keep
operating. The company shifted its staff to a four-day week last
month, slashing pay by 20%. Mr. Chemezov said Rostec and Renault
were preparing a bailout package, but that the final details were
being worked out.
Mr. Chemezov said Mr. Andersson would leave AvtoVAZ straight
after the board makes the decision. Renault would then send one of
its executives out to take over operations, he said.
Mr. Andersson will be the most high-profile foreign CEO to be
ousted since Bob Dudley, now the head of BP PLC, left a joint
venture between the British oil major and a group of Russian
tycoons in 2008 after his work visa wasn't renewed and said he
faced harassment.
A 12-year veteran of the Swedish army, Mr. Andersson was
appointed to lead AvtoVAZ in 2014, tasked with turning a sprawling,
Soviet-era auto plant into an efficient modern enterprise. He had
taken charge of GAZ Group, a Russian truck and bus maker, in 2009,
leading it to a $120 million profit in his first year from a $1
billion loss a year earlier.
In 2014, he moved quickly to improve efficiency at AvtoVAZ. He
laid off tens of thousands of workers and renegotiated contracts
with suppliers, stoking resentment as some local suppliers couldn't
pay workers.
AvtoVAZ was once the pride of the Soviet auto industry, based in
the town of Togliatti some 500 miles east of Moscow. The company
churned out boxy, practical cars such as the Lada sedan.
The factory endured a chaotic decade-and-a-half after the
collapse of the Soviet Union, including shootouts at the factory
gates as criminal gangs vied for control. Russian auto
manufacturers have faced stiff competition from global brands.
The company was taken over by the state arms-trading agency
Rosoboronexport, now a subsidiary of Rostec, in the mid-2000s.
Renault bought a one-quarter stake in 2008 and took a controlling
interest along with Nissan in 2012. The companies have invested
over $2.6 billion since 2008 over a series of deals.
The Rostec chief praised Mr. Andersson for cutting some costs
and launching production of two new cars.
But those layoffs stoked tensions in the town, leading to
several protests late last year.
"The tension was building up (in Togliatti)," said Mr. Chemezov,
who used to meet with Mr. Andersson monthly. "I told him several
times to be careful, but he doesn't understand."
Write to James Marson at james.marson@wsj.com and Paul Sonne at
paul.sonne@wsj.com
(END) Dow Jones Newswires
March 04, 2016 15:16 ET (20:16 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
Nissan Motor (PK) (USOTC:NSANY)
Historical Stock Chart
From Jun 2024 to Jul 2024
Nissan Motor (PK) (USOTC:NSANY)
Historical Stock Chart
From Jul 2023 to Jul 2024