If anyone is interested..... (by the way: why does a Russian town have an American name? Because it was re-named after an Italian Communist Party leader in the 1970s)
TOLYATTI, Russia, May 27 2007-Judging by the sulk on Vladimir Putin's face and the force with which he was slamming the car doors shut, the president was not in a good mood.
Perhaps weighing on his mind during a visit earlier this month to the showroom of Avtovaz, maker of the famous Lada, was the fate of the country's car industry against foreign competition.
"Without new technologies, we can't compete. We need investment," one harried Avtovaz executive told Putin as he pointed apologetically to a chart showing losses in market share to foreign models.
Other executives stood whispering as Putin cast a sceptical eye over the cars. "Looks alright," Putin muttered of one vehicle, showing interest only in another sports model that is not yet in production.
The kowtowing at Avtovaz was not just about awe in front of Russia's powerful head of state. The company, which is now state-controlled, is asking for billions of dollars (euros) in state money to regain market share.
The maker of legendary and notorious models such as the Lada and the Niva, Avtovaz once dominated the Soviet auto industry and remains by far Russia's biggest car producer.
But that heyday is long gone. The cars, a source of amusement in the West because of their boxy appearance and reputation for being unreliable, are being shunned by many younger Russians.
Avtovaz's share of the Russian car market went down from 38.7 to 32 percent in 2006, while foreign carmakers like Ford, Renault and Toyota for the first time took up most of the market -- 51 percent.
Even Lada loyalists fond of the car's resilience during Russia's harsh winters and the ease with which it can be repaired are giving in to a flood of foreign models that are becoming increasingly affordable.
Avtovaz appears at least to have put behind it the bad old days of the 1990s, when rival mafia clans battled over dealership deals and contract killings of Avtovaz executives in the company town of Tolyatti were frequent.
It was here that controversial billionaire Boris Berezovsky made his first millions by setting up a dealership called Logovaz to sell Avtovaz cars in the Moscow region.
Berezovsky, a fierce Kremlin critic who lives in self-imposed exile in London, is now wanted in Russia on charges of massive fraud linked to his business with Avtovaz during the 1990s.
The company is currently not in bad financial shape. Annual net profit rose by 79.4 percent in 2006 from 54.2 to 96.8 million dollars (40.1 to 71.6 million euros), though debts to suppliers are still large.
Published results show that sales have fallen, however. One local newspaper in this company town, located 1,000 kilometres (621 miles) southeast of Moscow on the banks of the Volga, has spoken of a sales "crisis."
The sprawling Avtovaz factory in Tolyatti covers 600 hectares and was designed by Italian car giant Fiat. It began production in 1970 of the Zhiguli, named after a chain of picturesque local hills.
"The equipment is 40 years old.... It'd be easier to build a new factory than to upgrade the current one, but there's no money," said Alexei Mironov, editor of the Tolyattinskoye Obozrenie weekly.
The company is making efforts to upgrade however. In 2001, it set up a joint venture with General Motors to produce the Chevrolet-Niva and it has signed up for a similar project with Austrian-Canadian auto parts producer Magna.
"We want to see this powerful car factory do well not only in Russia but also outside of Russia," Frank Stronach, chairman of Magna, said earlier this month at the signing in Tolyatti of a memorandum on the planned joint venture.
But locals fear that moves towards greater efficiency at the company will force Avtovaz to shed non-core assets such as hospitals and sports complexes dotted around the city.
The company employs 108,000 people out of a population in Tolyatti of 730,000 and has large supplier networks that create jobs for thousands of other local inhabitants.
As Sergei Davydov, a reporter at Tolyattinskoye Obozrenie, put it: "Our city is a monster standing on a crutch. The crutch is Avtovaz. If that's taken away, the city will just collapse."
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If anyone is interested..... (by the way: why does a Russian town have an American name? Because it was re-named after an Italian Communist Party leader in the 1970s)
I meant "Italian" of course. Doh!
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Hold on a sec.
I thought it was the case that, although Autovaz's share in the ex-Soviet countries has persistently fallen in recent years, that the country's increased affluence meant that in terms of numbers of cars sold, they were actually increasing in size.
Is that not the case any more then? Their profits certainly seem healthy enough.
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Overall market share has fallen but sales continue to rise. Much of the damage incurred to the companies finances in the early 90's was due to schemes that involved cars being sold to a Cypriot company that then had the exclusive sales distribution rights with massively deferred payments to the factory.
Currently, Avotvaz continues to introduce new models whilst maintaining production and parts supply of most of its old range - an admirable policy.
Additionally, the likes of Hyundai and Kia and in the throws of establishing assembly plants in Russia, Hyundai are already assembled from KDK in the Cherkassy factory of Luaz and Astras and Passats are also assembled here in Ukraine alongisde Ladas and Volgas.
In principal the future of the automotive industry looks good for Russia and Ukraine however, China is a major threat with its ability to produce cars to western standards for a fraction of the cost.
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