NSANY Nissan Motor Company Ltd (PK)

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)

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