NSANY Nissan Motor Company Ltd (PK)

   (FROM THE WALL STREET JOURNAL 3/5/16) 
   By James Marson, Paul Sonne and Jason Chow 

MOSCOW -- Russia's largest auto maker, OAO AvtoVAZ, is poised to remove the Swedish auto executive who took charge just before the country fell into a recession that led to sharply lower car sales.

Bo Andersson, a former General Motors and Saab Automobile executive and the first non-Russian to run AvtoVAZ, will be relieved as chief executive at a board meeting later this month, said Sergei Chemezov, CEO of state-owned conglomerate Rostec, which owns a 25% stake in AvtoVAZ.

Mr. Chemezov said that the controlling shareholder, a Renault SA and Nissan Motor Co. alliance that owns just over half of AvtoVAZ, has agreed to the move. The alliance partners invested over $2.3 billion in the company since 2008.

Mr. Chemezov said Rostec and Renault are preparing a bailout, but the final details were still being worked out. Rostec could convert debt to equity while Renault would have to inject funds, he said. Rostec has said it doesn't plan to increase its stake.

"Now, we need to change the person," said Mr. Chemezov, a friend of Russian President Vladimir Putin since the 1980s. "That's all."

Spokesmen for Renault and AvtoVAZ declined to comment. Mr. Andersson couldn't be reached to comment.

Mr. Andersson "has been totally caught off guard," by the decision, said a person familiar with his thinking.

Renault and Nissan placed a bet on Russia's auto market when they took a controlling stake in AvtoVAZ in 2014. Russia is the French company's only significant growth prospect outside Western Europe. But Western sanctions over the Ukraine conflict and tumbling oil prices drove Russia into recession last year.

Total car sales in the country 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 mainstay Lada cars were down 31% last year to 269,000 vehicles compared with 2014.

Last month, AvtoVAZ said it needed a bailout, its second since 2009, after its net loss for 2015 nearly tripled from the prior year, to 74 billion rubles ($1.2 billion). The company also shifted its staff to a four-day workweek last month, slashing pay by 20%.

Mr. Chemezov said in an interview that he disapproved of how Mr. Andersson steered the company as the economy crumbled, but said the main reason for calling for Mr. Andersson's removal was last year's steep loss. He said he expected Mr. Andersson would leave AvtoVAZ soon after the board makes its decision. Renault plans to send one of its executives to take over operations, he said.

Mr. Andersson would be the most high-profile foreign CEO to be ousted from a Russian company since Bob Dudley, now the head of BP PLC, left a joint venture between the British oil company and a group of Russian tycoons in 2008 after his work visa wasn't renewed and he said he faced harassment.

In 2014, he moved to improve efficiency at AvtoVAZ. He laid off tens of thousands of workers and renegotiated contracts with suppliers, stoking resentment after some local suppliers couldn't pay their workers.

So far Renault hasn't been severely wounded by its investment. The French auto maker reported earnings rose 49% on a 10% revenue gain last year as the European auto market gained steam. Its share of AvtoVaz's loss was $700 million for 2015.

The Rostec chief praised Mr. Andersson for cutting some costs and launching production of two new cars. But, he said, Mr. Andersson had too often turned to foreign suppliers instead of local suppliers.

(END) Dow Jones Newswires

March 05, 2016 02:47 ET (07:47 GMT)

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