During the meeting Mr Komarov reported back to the prime minister on the state of affairs at his company, which moved into profit, increasing its sales volumes through the state-run used car scrappage programme. Now AvtoVAZ has moved to a new development phase dominated by advancing technical and technological activities, increasing the quality of cars produced and improving the skills and labour efficiency among the personnel, Mr Komarov said.
Mr Putin noted that the used cars scrappage programme, which has allowed AvtoVAZ to stay afloat, carries the hidden danger of hindering the company's technological upgrading as it forces the plant into using its capacities for manufacturing cheap and outdated car models as the programme demands. Mr Komarov elaborated that this is a forced measure since the launch of new models of car requires time and personnel training. At the same time, he said, the work to renew the plant and the range of models it produces is being implemented in accordance with the plan agreed with the company shareholders.
Transcript of the beginning of the meeting:
Vladimir Putin: Let us discuss the company's current condition and its prospects once again. Last year, the company saw a loss of 40 billion roubles, correct?
Igor Komarov: About 40 billion roubles.
Vladimir Putin: Now the company has just moved into the black, posting a profit of one billion roubles, which is substantial even for such a large enterprise. I remember we reached agreement with you and the foreign investors and how you together developed a joint plan for the technical upgrading of the plant, the development and launch of new models. All aiming to make AvtoVAZ an up-to-date, economically efficient, sustainable company with good prospects. What is being done to turn these plans into reality?
Igor Komarov: Mr Putin, I would like to note with satisfaction that the government's efforts and support it provided to AvtoVAZ, in addition to the programme developed with the company's shareholders, have brought positive results.
We are seeing positive results and have increased sales principally through the used car scrappage programme. In the second quarter of this year the plant's sales doubled compared with the first quarter. This allowed the company to make a good profit and yield positive results.
I should say that these measures and the support given have yielded their results as expected. I believe that overall we have made it through the most difficult and thorny period of the AvtoVAZ anti-crisis programme. Now the shareholders have agreed on AvtoVAZ's future as one of modernisation, the development of a new range of models and the creation of an efficient and up-to-date car manufacturing enterprise for the future.
At the moment, we are moving into a more difficult phase, one which daily requires painstaking work altering the technological processes at AvtoVAZ and developing new kinds of AvtoVAZ vehicle. We deem it necessary to modernise the plant and its manufacturing process and, first and foremost, to change the staff's attitude towards their work and professional duties.
Vladimir Putin: Regarding the staff, I think you have no need for doubt in this regard. I have visited the plant on several occasions and met with workers who have worked there all their lives. Labour activities should be well organised. I mean you have a modernisation plan for the company, isn't that so? This plan was agreed with all parties, including the foreign investors, and essentially serves as an engine for gradually moving towards the technological upgrading of the plant. What is currently being done to implement these plans?
Igor Komarov: We have just launched the pre-production programme for our low-end car, based on the Lada Kalina model and developed at AvtoVAZ in conjunction with French specialists. We plan to go into production by the end of 2011. We have also started organising production on the B0 platform to manufacture five models of three brands, with the production launch scheduled for March 2012.
Vladimir Putin: Would you just explain, clearly and lucidly, your activities in the short-term to implement these plans? When we allocated state funds, we struck a deal with Renault, which agreed to provide technology for AvtoVAZ, and we agreed on certain things that were to be done. What efforts will you make in the immediate future to carry out those plans we mentioned?
Igor Komarov: The planned reorganisation and implementation is a diverse process, concerning both launch of those new models I mentioned in addition to investment, altered production and production technology changes. We are launching a new press machine line we purchased from Japan's Komatsu, which will allow us to secure a new level of efficiency and new level of quality in our products, including moulded car parts.
We are devoting serious effort to improving the quality of car models already in use, and we have achieved considerable progress in this regard, which I will report on further. The company is also working to improve the production system as well as its technological processes. In conjunction with Renault and Nissan, we plan to introduce a new production system similar to the Nissan or Toyota production systems.
Vladimir Putin: You know, I am asking you all these questions not for the sake of it. The used car scrappage programme has proved efficient, that is true. Yet we know that it involves models that have not only withstood the test of time but which have been proved outdated and which require a replacement. There is the danger that the success of state support in the form of the used car scrappage programme will obscure the main objective, namely the plant's modernisation.
Igor Komarov: Yes, you are absolutely correct. The automotive industry's particular features are its crucial pre-production and new model launch stages. And alongside modernising and launching new models we are constantly working on providing the plant with activities for the next 1.5-2 years when the production of new models will begin. Along with perfecting the technical and technological process, we put constant effort into improving the personnel's efficiency, training and skills. Some 500 people will receive training at Renault plants and will take special courses to obtain skills for future work and the production of new models.
In addition, we continually work on the preparation and engineering of minor components and details. AvtoVAZ has laid firm foundations for its partnership with the Renault-Nissan alliance. I believe that this Renault-Nissan collaboration is the first time we have established an equal partnership with equal access to technical developments, innovations, and platforms developed by the Renault-Nissan alliance. I think that, given the peculiarities of our market, we will start work on a project to create platforms and cars that can cope with Russia's roads and that are drawn from the needs and desires felt by Russians, and in terms of price, that they can afford.
Vladimir Putin: When will this work commence?
Igor Komarov: It has already started and is well underway. A significant step will be taken on July 16, 2010, when Renault's and AvtoVAZ's boards of directors will meet for a full session. At the meeting, we will discuss practical steps to implement different plans related to developing a panel of suppliers and new research, as well as launching new models and new projects, and defining investment volumes and priorities for further development. We are actively moving from the initial stage of familiarising ourselves with our partners and drawing up programmes to the actual phase during which we will implement the projects.
Vladimir Putin: Good.