GM-AvtoVAZ, GM’s joint venture in Russia between General Motors and Russian automaker AvtoVAZ that produces the Russian-market Chevrolet Niva SUV, will optimize production at its plant in Tolyatti, Russia this year.
The optimization will come in the following forms:
- Reduce shifts from two to one, while retaining a 5-day workweek
- Make technological improvements to production lines
- Reorganize jobs to allow production-line speed to be doubled
Reduce Costs, Increase Capacity
According to a WardsAuto report, the moves are designed to significantly reduce production costs and increase plant capacity.
Current capacity is estimated to be 98,000 units, although the current level of utilization is only 30 percent. However, production levels at the plant fell 24 percent to 34,200 cars in 2015, compared to 2014. The drop in production volume is directly correlated to Niva sales dropping 28 percent to 31,367 units.
Interestingly, the joint venture doesn’t plan to lay off any workers, despite the ongoing economic and financial crisis in the Russian market. The plant employees roughly 1,400 people.
Hoping For Recovery
The joint venture is hoping that domestic sales will recover this year. To assist that, it GM-AvtoVAZ is now once again participating in the vehicle scrimmage scheme launched several years ago by the Russian government. The program allows Russian consumers to purchase the Niva at significant discounts.
By participating in the program, the joint venture hopes that it can avoid further price increases for the vehicle due to inflation of the Russian Ruble.
To further grow sales and plant utilization, GM-AvtoVAZ is also gearing up to increase exports of the Niva. Current target markets include the Commonwealth of Independent States countries, including the major markets of Kazakhstan and Azerbaijan.
Even so, Wards says that export volumes totaled just 2,374 units in 2015, a 40 percent year-over-year drop. The decrease is a reflection of the slumping economies of most countries in the CIS regions, as the economic climates of those nations follow closely to that of Russia.
New Niva Project
Even with the depressed economy, GM-AvtoVAZ is still planning to proceed in bringing to market an all-new generation Niva, widely considered the joint venture’s most ambitious project since its inception.
However, the all-new Niva will also require a new production facility. For its part, GM-AvtoVAZ is actively negotiating with banks on loans for continuing construction of its new plant in Tolyatti. Construction of the plant commenced in 2013, but was paused in 2015 due to Russian financial and economic crises in Russia, along with the devaluation of the Ruble thanks to economic sanctions imposed by the West.