Carlos Ghosn has no doubt: Russia will be his “cash machine”. Audacious, the bet has almost failed to weaken the boss of Renault and the accounts of the manufacturer. “When I came here two years ago, it was extremely difficult,” recalls Nicolas Maure, the French sent in 2016 by the Parisian management with the approval of the authorities in Moscow for a mission that many, including at Renault headquarters, thought impossible: “save AvtoVAZ in a crisis context in a very depressed market! Explains the director of the legendary Lada constructor. The recession in Russia, caused by the fall in oil prices and aggravated by Western sanctions against Moscow since the Ukrainian crisis, had hit him hard: sales and reputation down, losses and debt increased.
“For Renault, AvtoVAZ was then a problem. Today, it is again an opportunity, “enthuses Nicolas Maure. Sitting behind his desk overlooking the Volga and the post-Soviet Toliatti factory, a huge 600-hectare complex 1,000 kilometers southeast of Moscow, he speaks with relief in his voice, a serene look. With one goal in mind: to take advantage of the Russian auto boom which, interrupted by the crisis, is very promising, as this country can become first market in Europe with potential sales of more than 3 million a year.
” We are ready ! The work of the expatriates Renault here works well, in good fusion with the local teams. The image of Lada progresses. AvtoVAZ has gained 3 market points since 2015, rising to almost 20%, thanks in particular to the success of the Vesta and Xray models. We just recorded a operating margin positive, one year ahead of schedule. And we are on our way to a net profit positive for 2020 “, summarizes Nicolas Maure as he prepares to pass the baton and that Renault, ten years after its first entry into the capital of AvtoVAZ, has just increased its stake.
Majority control
In recent weeks, everything has accelerated at AvtoVAZ. April 11, Carlos Ghosn and Sergei Chemezov, the boss of the powerful conglomerate Russian public Rostec, minority shareholder but a decisive player, launched the second stage of the recapitalization of the manufacturer started in 2016. After the first stage (opening of the capital) and now a conversion of debt into shares, this will represent a total amount of 107 billion rubles, or 1.4 billion euros at the current rate.
This restructuring brings to 61% Renault’s share in the joint venture created with Rostec to control AvtoVAZ. And, via a structure in Russian dolls, its share in the manufacturer passes indirectly to 51%. The operation has so far cost Renault 45.5 billion rubles, more than 610 million euros at the current rate.
“This is the biggest transaction in the history of the Russian car industry,” insisted Sergei Chemezov, who, former spy of the KGB as his friend Vladimir Putin, is the eye of the Kremlin at AvtoVAZ, flagship of national industry. It is he who finally approved the choice, submitted by Carlos Ghosn, for the succession of Nicolas Maure.
Promoted on 1 January at the head of Renault’s operations in the Eurasia region (including Russia), he handed over the management of AvtoVAZ and the chair at the top of the blue tower of his Togliatti factory to Yves Caracatzanis, who irony of musical chairs at Renault, he had already succeeded in 2016 at the head of Renault Romania with Dacia.
Positive contribution
“The changes are in continuity,” say Nicolas Maure and Yves Caracatzanis, met together at Toliatti during a working session before the transition on June 1st. A first at AvtoVAZ, accustomed until then to the tumultuous passages relay. The two men were all smiles: the last financial results AvtoVAZ, published on February 15, confirmed that the manufacturer is back on track.
It divided by almost five its net loss in 2017, to 9.7 billion rubles (130 million euros at the current rate). His turnover rose by 22% to 225.7 billion rubles (about 3 billion euros). Cost control resulted in a positive operating margin of 0.7%. For Renault, this was all the more “a pleasant surprise”, according to the expression of Carlos Ghosn, that AvtoVAZ has brought a positive contribution of 55 million euros . In 2016, it had on the contrary weighed 89 million on the accounts of Renault (consolidated by put in equivalence).
Another good news: the acceleration of the recovery of the Russian automotive market, which, halved after four years of falling sales, increased by more than 20% in the first quarter. It should grow by 10% over the year. Still very far, however, of the 3 million cars sold in 2012, a record year.
These good performances contrast with the slump in which Nicolas Maure landed in the spring of 2016. The recession then reduced the purchasing power of the Russians and sealed not only the sales of AvtoVAZ, a specialist in the entry-level, but also its profitability. With, in the end: four years in the red and total losses of more than 2 billion euros.
Radical style
This descent into hell led to the downfall of Sweden’s Bo Andersson, who in 2014 was the first foreigner to take over AvtoVAZ. His decision to favor foreign suppliers to modernize production has angered workers and authorities. Especially since the builder was particularly affected by the misdeeds of the depreciation of the ruble on the cost of its imports.
Bo Andersson, with his radical style, wanted to make a clean sweep of AvtoVAZ’s Soviet past. Terminating supply contracts tainted by corruption. Selling ancillary activities. Closing useless buildings. Significantly reducing staff (from 55,000 to 42,000 employees) and the number of levels of responsibilities while increasing payments to results. “He did the dirty work,” said at the time “Echoes” a Frenchman on the spot. But, by dint of too much jostling, Bo Andersson was forced to resign, replaced by Nicolas Maure.
A half word, the new direction from Renault criticizes the reforms of Bo Andersson. The priority is no longer drastically lowering staff. With now some 36,000 employees in Togliatti (far from the 150,000 in the great Soviet era), “we are about balanced in terms of numbers,” says Nicolas Maure, who, without the brutal style of his predecessor, plays the card human relationships. Regularly, he presents himself with humor in “Nikolai Ivanovich” to his employees and reminds them that he was born on April 22, the same day as Lenin.
An industrial park has also been developed to recycle available assets and hire some of the staff. An ex-shopping building has been converted into a call center for a bank. And a former machine tool site is now home to a German factory of domestic radiators.
Preferred local suppliers
Another priority is Rostec, the de facto representative of the public authorities in this company, symbol of the industrial modernization desired by the Kremlin: to favor local suppliers. The global rate of locally manufactured components is already 80%, with half coming from Russian companies.
In the factory itself, however, Renault’s presence has been strengthened. When he arrived, Nicolas Maure felt alone, with only two Renault managers. Today, they are fifteen, across the range of trades. “We will also recruit a lot of engineers, 350 this year, mostly Russians. Ultimately, the goal is that AvtoVAZ will be driven mainly by Russians. But based on the standards of the Renault-Nissan Alliance, “he insists.
Hence its all-out policy for two years to further anchor modern methods of Franco-Japanese work on this site still heavily influenced by its Soviet heritage. English courses are offered and training organized in factories in France or Romania.
Kaizen method
The hunt for defects is declared, particularly along the 1,500 meters of the BO line, installed by Renault in 2012 to produce three of its models but also two Lada and one Nissan. An example to follow for the ongoing modernization of the other two lines of the site, producing only Lada.
Everywhere, tables list systematically the problems encountered and the solutions found to ensure the quality of production in every detail. The Kaizen method is applied, set of Japanese management practices to avoid waste and improve workstations.
“In 2016, Alliance standards were limited to lines shared with Renault. Today, they are applied everywhere, “recalls Nicolas Maure. With a view to launching 12 new models by 2026 designed by the Alliance, the three production lines must be modernized. “They will be technically capable of producing the full range of Renault and Nissan, including more sophisticated models if necessary,” he says.
For the moment, Togliatti’s production lines remain between 0 and 15% less productive than Renault’s other comparable lines in the world. “For Dacia in Romania to be perfectly up to our standards, it took fifteen years. Here, we still need at least five years, “warns Nicolas Maure, who, while seeking to strengthen export sales dropped to historically low records, wants above all to regain the heart and the portfolio of Russian consumers.
Faced with competition from the Korean Hyundai and Kia, all marketing has been renovated, from television campaigns to dealer design. With one ambition: to change the Russians’ image of Lada, always associated with low prices and poor quality. But at no time was there any talk of marketing to sell “Lada by Renault”. To each his own mark, insist to Togliatti the frames of the diamond mark …