Translated material
Anti-crisis optimism
AvtoVAZ presented a long-term development plan
The Russian auto giant AvtoVAZ, which is experiencing serious difficulties with sales of its cars, still intends to “come out of the crisis strong.” To achieve this, the plant wants to restore profitability in 2009, reduce costs and support demand through its own program of cheap loans. All these provisions are contained in the approved anti-crisis plan of the car plant, which AvtoVAZ announced yesterday. After this message, the company's shares on the MICEX rose by almost 20%.“AvtoVAZ is already looking beyond the horizon of the crisis and is not abandoning its main strategic goal - to be the largest domestic automaker,” the company said yesterday, noting that its investment program for 2010-2012 will amount to 80 billion rubles. and will allow, by 2014, to completely modernize the supplier base to meet international standards, as well as release nine new models.
However, what kind of models these are is still unclear. Previously, the company only announced that it intended to present new “B” class models on the Logan platform purchased from Renault, as well as a “C” class car of its own design, on the basis of which, in particular, a crossover could be created. To finance the investment program, AvtoVAZ, as is known, has already signed a memorandum with Sberbank, VTB and Gazprombank. Banks intend to provide loans to the plant in the amount of over 90 billion rubles.
AvtoVAZ's anti-crisis plan consists of three blocks. The company needs to reduce costs and create additional cash flow. This is planned to be achieved by optimizing logistics processes and reducing factory inventories of components by at least 600 million rubles. in monetary terms and reducing the stock of cars in the enterprise's warehouses by 70 thousand units. The second task is to restore profitability in 2009, maintain and increase market share in the face of a general decline in automaker sales. The reengineering process, according to AvtoVAZ management, should bring the company savings of about 2 billion rubles, and the economic effect from optimizing the cost of repair work is estimated at 500 million rubles. Reducing general administrative expenses “should bring an additional 1.5 billion rubles.”
The activities planned by the third block of the anti-crisis plan should ensure the long-term development of the company. As part of the anti-crisis program, a number of measures to stimulate demand are also planned. Thus, AvtoVAZ is implementing a program to provide discounts to customers, and since May of this year, its own credit program “Lada Finance - Lada on credit” has been running. The program allows you to purchase a Lada car on credit at reduced interest rates - from 6.9%. Profitability will be ensured by reducing purchase prices for the packagers' products. “By the end of 2009, costs must be reduced by 10%,” the plant said in a statement. It is also planned to reduce payments to staff by refusing to recruit new employees, refusing to index wages and reducing salaries for the company's management by 20%.
At the end of March, Prime Minister Vladimir Putin promised AvtoVAZ state support in the form of a loan of 25 billion rubles. to pay off the debt, and large-scale assistance was also promised in the future. According to Mr. Putin, after receiving state support and paying off debts and suppliers, AvtoVAZ will be able to independently attract credit resources in the amount of over 90 billion rubles in order to enter the production of a new line of cars.
Market experts yesterday calmly reacted to the concern's new plan. “Everything was expected,” noted Igor Kraevsky from Pioglobal Asset Management. “True, it remains unclear how AvtoVAZ will be able to develop nine new models in such a short time.” “As for sales, the announced program will most likely stimulate demand in the regions of Russia. In Moscow and St. Petersburg, sales are unlikely to increase,” the expert emphasized.
AvtoVAZ's short-term debt in the first quarter of 2009 amounted to 80.55 billion rubles. The company's long-term liabilities, including loans and credits, as well as deferred tax liabilities with other long-term liabilities, amounted to RUB 11.6 billion at the end of the first quarter of this year. Sales of Lada decreased in April 2009 compared to the same month of the previous year by 49% - to 34.14 thousand units, with a general drop in the market of new passenger cars and light commercial vehicles by 53%, according to the Association of European Businesses.