The Automaker’s Pride

You have praised Russia for addressing issues in a timely manner. What does that mean in practice and what benefits does it offer you?

First of all, the policy of the Russian Ministry of Trade has very consistently supported the automotive industry over the past six years that I have been here. Secondly, when the crisis hit last year, the government quickly responded by introducing a government scrappage scheme. Thirdly, there is a continuous open dialogue with representatives of the automotive companies.

What about at the enterprise level? What happens to a decision as it moves from the top management level down through all the intermediaries to the person who will have to execute it? Is everything being done exactly as intended? What has your personal experience been like?

My advantage is that every day at 6:45 a.m., I meet with the top executives and we discuss outstanding issues. But in the Russian Federation, as a rule, it is necessary to put an order in writing before it is passed down the chain.

One of Russia’s pet peeves is low productivity. Are there any ways to improve the situation in the foreseeable future? What did you personally have to do to improve the situation?

Productivity is a big problem for us. We have improved it by about 50 percent when it comes to automotive operations. But in the area of components, the situation is much more difficult. One possibility to improve labor productivity is to introduce new products. This is why we now offer Vesta and Xray, where we combine good design and engineering with modules and systems, which make it easier to build our cars. AvtoVAZ works with its staff based on the Kaizen principles. Our employees are guaranteed that their jobs will be safe, but we demand that defects on our production lines are not allowed.

In your opinion, what should be the priorities of Russia’s industrial policy?

It is important to bring back the pride for Russian production and products, as they are just as good as the imported ones. When I go to the supermarket, they try to convince me to buy imported cheese or sausage. Many Russians do not believe in their own capabilities, which is why I fully support the government’s initiative of import substitution with local products.

How successful is the so-called anti-crisis policy? Can we evaluate it critically?

I can only talk about the automotive industry. The government responded to the crisis quickly. The strategy has been consistent since its inception in 2009, and today, the manufacturers that managed to go completely local receive awards. Localizing your business always has advantages. You get the same currency in terms of costs and revenues, as well as cheaper logistics. What the government needs to do is to continue to promote local manufacturers and continue to launch programs for purchasing locally produced vehicles. I am talking about companies that manufacture here, have a base of local suppliers, and create opportunities for Russian citizens.

What is it that the Europeans and the Americans do not understand, or that they misunderstand, about Russia?

A lot. Russia is the largest country in the world. We have very good, very hard-working people. It is clear that when it comes to the automotive industry, the Russian Federation is and will continue to be one of the top ten markets in the world. This is a complex and competitive market, it offers over 550 products. I feel that I am welcome here, I feel at home here, and I go from success to success in different areas in this country. AvtoVAZ is not an easy business, but I believe in it and in the Russian market as well.

What do foreigners think of products made in Russia?

I think that most of them simply do not have any experience with them. It is clear that in terms of perception, the oil and gas industry in Russia is very strong. It is also clear that Russia has tremendous potential in producing military hardware. At the same time, the perception of other products is extremely weak, and it is in our power to change it.

What would you do if your goal were to attract investments to Russia?

First of all, it is important to show why people should invest here. This market has its ups and downs, but in the long run this will be one of the largest markets in the world. This is a market where you can be competitive, if you do it right, and it’s a market where you have access to good employees. We have very smart people in Russia. If you take the Avtovaz Lada 4x4 factory, for example, you will see that it is one of the most productive in the country. It was created 40 years ago, and much has been lost over the years. What we need now is to bring it all back.

You have worked in Russia long enough to be able to give advice. How could a foreigner adjust to the Russian mentality and the Russian work ethic?

One part of Russia is looking to the West, and the other to the East. You will always have both positive and negative impressions of Russia, but by and large, it is a fantastic country for work. For me personally, it’s a fantastic experience. Sometimes it seems that I studied for 40 years in order to head AvtoVAZ, and my job here is to find the right people, set the right tasks for them, and train them. This is something we work on every day.

Do you change the corporate culture at AvtoVAZ?

First of all, we make sure that people are proud of Lada products. Secondly, we improve the quality of our products. Thirdly, we develop new products. And finally, we have to be profitable. If we don’t make a profit, we are unable to invest in new products.

What have you managed to accomplish? Where did you fail? How would you rate your time working at AvtoVAZ?

I’ve been here for a year and a half. What I am most proud of is that I have been able to change the work culture at AvtoVAZ. My first month here, I appointed 11 Russians to be responsible for one area: five of them for the automotive division, and the remaining six for components. We have reduced our costs, but we are still losing money. The biggest challenge is to change the perception of the Lada brand. In this area we have not succeeded yet. The only way to achieve this is to offer new products that exceed people’s expectations.

Could AvtoVAZ repeat the history of Hyundai, the company that persistently aimed to achieve international-level quality, a good image, and success in foreign markets?

I would not compare AvtoVAZ to Hyundai. I would rather compare AvtoVAZ to Škoda 20 years ago. Our situation is a lot more similar to theirs. Our huge advantage is that we have invested in production. We have modern production facilities, assembly lines, and a paint shop. We have a huge market. To be sure, we cannot copy Škoda, but obviously, if we play our cards right, AvtoVAZ will be a successful company with competitive products and a player in the global market.

One part of Russia is looking to the West, and the other to the East. You will always have both positive and negative impressions of Russia, but by and large, it is a fantastic country for work. For me personally, it’s a fantastic experience. Sometimes it seems that I studied for 40 years in order to head AvtoVAZ, and my job here is to find the right people, set the right tasks for them, and train them. This is something we work on every day

Shouldn’t Russia impose serious restrictions on automotive imports in order to stimulate the local automotive industry?

I love competition. I believe in competition. I do not think that protecting the industry is the correct measure. What is a Russian product? Is it a product manufactured in St. Petersburg for a foreign company? Of course not.

How does AvtoVAZ plan to develop its exports?

The most important market for us is the Russian market. We must increase our share to 20 percent and convince Russians that we have good products. If we are not successful in our own market, exports are almost meaningless. There are 14 countries that have land borders with the Russian Federation. Today, we are focused on 12 of them. One strong market for us is Kazakhstan. Focusing on exports means re-positioning ourselves in the CIS, and then in Eastern Europe, North and South Africa, the Middle East, and Latin America.