CEO Under Fire At Russian Car Giant
March 05 2016 - 6:15PM
Dow Jones News
(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 18:00 ET (23:00 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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