Russia’s Lada Maker Plans to Cut White-Collar Staff

OAO AvtoVAZ plans to eliminate additional white-collar jobs in the latest round of staff cuts aimed at turning around Russia’s biggest carmaker.

The manufacturer of Lada vehicles will drop as many as 1,500 management and salaried positions next year, when it targets an operating-profit margin of 3.5 percent of revenue, Chief Financial Officer Evgeny Belinin said today in an interview. The cuts are in addition to plans this year to reduce white-collar staff to 10,000 people from 16,000.

“The problem isn’t with working people, it’s with managers and specialists,” Belinin said at the company’s headquarters in Togliatti. “There are situations when we have managers who only manage one person.”

AvtoVAZ, founded in 1966 when Russia was part of the communist Soviet Union, has been cutting jobs and upgrading its vehicles in a bid to compete with western competitors like Volkswagen AG and Ford Motor Co. In total, the Russian manufacturer, which is controlled by Renault SA and Nissan Motor Co., already plans to eliminate 12,800 jobs, or 19 percent of its workforce, by the end of this year.

As part of the restructuring, AvtoVAZ will concentrate administrative functions in two buildings, compared with four now, Belinin said. The empty buildings will then be rented out.

Shrinking Market

Russia’s car market has been shrinking this year as U.S. and European Union trade sanctions linked to the government’s disputes with Ukraine bring economic growth to a halt.

The Industry Ministry outlined plans today for a sales incentive starting Sept. 1 that will grant discounts of 40,000 rubles ($1,100) to 50,000 rubles on trade-ins of older cars for new vehicles, and 300,000 rubles to 350,000 rubles for trucks. The program will expire at the end of this year, with a second round possible after mid-2015, depending on the market, Industry Minister Denis Manturov said at a press conference.

AvtoVAZ rose 8.3 percent to 10.22 rubles at the close in Moscow, the biggest jump since Aug. 13, 2013. That pared the stock’s decline this year to 6.2 percent, valuing the carmaker at 18.6 billion rubles.

Lada’s sales have slumped even faster than the industrywide drop, with the carmaker accounting for 15.7 percent of nationwide deliveries in the seven months through July, down from 16.9 percent a year earlier.

The carmaker is targeting a 20 percent market share in 2016, scaled back from a 25 percent goal.

AvtoVAZ Chief Executive Officer Bo Andersson said yesterday that he reduced management layers to five from nine to streamline the company’s structure.

To free up resources, AvtoVAZ intends to sell 2 billion rubles worth of real estate and dealer-related assets over the next two to three years, Belinin said. The carmaker plans to invest 2 billion euros ($2.6 billion) over the next three to four years in its operations, the CFO said.

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE