Automotive News Europe - September 2011 - 62

AUTOMOTIVE NEWS EUROPE

OEM

AvtoVAZ’s sprawling factory in Togliatti, Russia.

RUSSIAN REVOLUTION
Renault is making the world’s biggest car plant fit for the future
LUCA CIFERRI
lciferri@crain.com

OGLIATTI, Russia — Here at AvtoVAZ's sprawling Togliatti assembly plant, the mood is optimistic after the company's near-collapse during the economic crisis. Togliatti is the world’s the biggest car plant, with its five assembly lines covering six square kilometers, and its giant press shop capable of churning out 1.5 million units a year. A healthy AvtoVAZ is crucial for Russia as the automaker’s revenues account for 0.5 percent of the country’s gross domestic product but the Togliatti plant is a shadow of its former self. When the downturn began in 2008, AvtoVAZ — never a model of efficiency — was forced to take drastic measures. First, the company laid off more than 20,000 employees who worked in its kindergartens, schools, hospitals and public transport — a relic of the company’s Soviet-era social services network. Next, AvtoVAZ eliminated 27,000 automotive jobs, reducing its

payroll is to 73,000 employees. The company was forced to take action after the great collapse of 2009, when industry sales in Russia plunged 50 percent to 1.5 million units. AvtoVAZ’s Lada was hit hard, as sales slumped 44 percent to 350,000 units. Unable to properly renew its aging product lineup, Lada could not compete with global brands like Chevrolet, Hyundai, Ford and Volkswagen. Despite the crisis, one of every four cars sold in Russia is still a Lada. But AvtoVAZ has yet to shed its reputation for poor quality and obsolete technology. That’s what the Russian automaker’s partners, Renault and Nissan, are trying to fix. A team of Russian, French and Japanese engineers are working on the new assembly lines and a paint shop that will produce five models based on the Dacia Logan. For easy identification, Renault employees wear yellow safety helmets, Nissan workers wear white, and Lada personnel wear blue. If you don’t remember your colleague’s name, no problem: it’s written on the helmet.

Despite their presence, Renault’s makeover of the huge Togliatti complex remains unfinished. New lines are being installed, but you can see buildings stretching for kilometers that have not been used in decades. And every now and then, you will see people who are doing absolutely nothing and do not even try to look occupied. That will change as Renault’s turnaround plan gains speed. Financial crisis Renault-Nissan CEO Carlos Ghosn wants to make Russia the largest market for the French-Japanese alliance. In 2008, Renault purchased a 25 percent stake in AvtoVAZ for $1 billion. But when the global recession set in, the company did not have the financial resources to rebuild its new Russian partner. AvtoVAZ was left to its own fate. By 2009, Russia’s largest automaker was on the verge of bankruptcy. The Russian government drew up a $900 million bailout and pressured Renault to give AvtoVAZ free access to the Dacia Logan technology. Renault, which previously expected to recoup 220 million euros for licensing Dacia technology to Lada, was forced to relinquish it for free to prevent a dilution of its stake in AvtoVAZ. In 2010, the Russian car market began to recover, and Renault expects industry sales to jump 41 percent this year to 2.7 million units. Russia's Ministry of Industry expects sales to top 3.3 million units in 2015, possibly surpassing Germany as Europe’s largest market. Renault sees big opportunities in Russia because car ownership is low at 230 vehicles per 1,000 people, less than half the number
REVOLUTION ❙ CONTINUED ON PAGE 63

Togliatti is very dependent on AvtoVAZ’s success.

ANE EXECUTIVE EDITION

SEPTEMBER 2011

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