Russian carmaker Avtovaz to ditch its Swedish CEO

Russian carmaker Avtovaz to ditch its Swedish CEO
Bo Andersson with President Vladimir Putin in October 2015.
By Jason Corcoran in Moscow March 8, 2016

Avtovaz will ditch its Swedish chief executive Bo Andersson as the Russia manufacturer of the Lada seeks to restructure its business amid record losses.

Andersson, a former General Motors executive who came out of retirement in 2013 to help turn round the state-backed company, will step down later this month, according to a statement issued by the company on March 7.

Hit hard by Russia's deepening recession, the company has been battling with bankruptcy fears after reporting in February a tripling of net losses for 2015. 

Avtovaz is majority-owned by Renault and its alliance partner Nissan but also counts Russian state-controlled group Rostec as a major shareholder. A replacement for Andersson is expected to be announced following a board meeting on March 15, according to the company statement.

In February, Avtovaz said market conditions "create a material uncertainty that gives rise to significant doubt about the group's ability to continue as a going concern".

Net losses in 2015 amounted to RUB73.8bn ($928mn), almost tripling the 2014 figure of RUB25bn.

Based on the Volga river in the city of Togliatti, Avtovaz employs about 44,000 people.

Ernst & Young raised doubts about Avtovaz's ability to carry on as a business after discovering the company's liabilities exceeded assets by RUB67.78bn ($857mn).

"These conditions, along with other matters ... indicate the existence of a material uncertainty which may cast significant doubt on JSC Avtovaz and its subsidiaries' ability to continue as a going concern," the audit firm warned.

Russia's car industry has been pummeled by a sharp economic contraction, fuelled by collapsing commodity prices and Western sanctions over the Ukraine conflict. New car sales plummeted 36% last year to 1.6mn vehicles and are down for a fourth straight year in 2016. Sales of Lada cars dropped 31% last year to 269,000 vehicles

French carmaker Renault has cut the value of its stake in Avtovaz by 225mn euros ($253mn) to 96mn euros. Russia's Rostec, which has a 33% stake in the holding company that controls Avtovaz, said it was considering converting part of the debt it is owed by the carmaker into shares to increase the troubled firm's capital

Andersson was tapped for the job after his success in turning around Gaz, the troubled Russian truckmaker. His remit was to modernise the carmaker, stamp out corruption and downsize its workforce.

But his management, and the axing of 40,000 jobs, led to protests in Togliatti, a mono-town located about 500 miles from Moscow.

Rostec chief executive Sergei Chemezov, a close ally of President Vladimir Putin, had agitated for Andersson to be removed. He was critical of Andersson's optimisation methods and said that "employees have been kicked out into the street".

In a recent interview with RBC Daily, Andersson said that he was 60 years old and "my career is coming to an end".