Avtovaz turnaround to come on Renault chassis

Renault is likely to use its popular budget Logan model as the platform to revive Avtovaz's ailing Lada brand. But Avtovaz says the poor quality of car part suppliers is now the main problem.

Unlike Napoleon's horses, the new Lada built with Renault’s help should have no problem working in snow. The Renault-Nissan Alliance is planning to use Logan chassis to produce models for all three manufacturers – and all at the Avotvaz Togliatti plant.

But one solution has only uncovered another problem, the company says. Only 20% of its car parts suppliers meet the technical standards needed to produce the new cars. Igor Komarov, President, Avtovaz.

"Suppliers – is our main problem. We can restructure our debt, we can import technology, but we may have nothing to work with! They have financial problems too and we must anticipate their needs. Many of them have debts which are higher than last year’s revenue."

Avtovaz says Russian components makers need help to restructure their debts and recapitalize. Meanwhile 35 foreign companies are in talks to set up a joint venture to supply Avtovaz.

Analysts say, with modernisation, state support and patient banks – Avtovaz can succeed within about two years. Dmitry Baranov, Senior Analyst, at Finam, says that despite its woes there is little chance of Russia’s largest domestic carmaker failing.

“The State will not leave the company without help. Its like a challenge for Russia, a matter of pride. And that’s why financial problems shouldn’t worry them. Creditors wont sue because they wouldn’t get very far.”

In 5 years the estimated capacity of Avtovaz, Renault-Nissan and Sollers will amount to 1.6 million cars annually. Last year Avtovaz sales fell 40% – yet Lada’s remained the most sold cars in Russia.