Oleg Nikishenkov

Russia’s oldest car manufacturer, Nizhny Novgorod-based GAZ, is marking 80 years since it started producing vehicles in February 1932, under license from the Ford Motor Company. Mirroring this first contract, in 2012 GAZ will begin to manufacture the Skoda Yeti, GAZ Group president and CEO Bo Andersson said, the first time it will have produced models for a foreign firm since World War II.

GAZ has developed a varied product line at 18 factories in ten regions of the country. It holds about 50 percent of the market for light commercial vehicles, or LCVs, and 45 percent for medium and heavy-duty trucks. The company is even more dominant in the minibus and bus market, with a share of 70 percent, and is strong in other areas, such as longdistance and road construction vehicles. According to GAZ reports, 2011 sales across all areas of its business amount to 105,000 units, placing it just behind AvtoVAZ among Russian car manufacturers.

Currently the biggest manufacturer of commercial vehicles in the former Soviet Union and eastern Europe, GAZ’s focus is on retaining its position in the future, Andersson said. Besides the operations under the Skoda contract — and additional ones starting in 2013, from Volkswagen, Chevrolet and Mercedes-Benz — Andersson believes that Russian-made LCVs will continue to be GAZ’s most competitive product since they are better suited to the local market. “GAZ retains a competitive advantage over foreign automakers due to our prices, our well-developed service network, the availability of spare parts, and products well adapted to Russian roads and climatic conditions,” he said.

The goal of maintaining its dominance is not without problems, however. Even with its pre-eminent position in the LCV market, minibuses comprise only 7 percent of the company’s output in the segment, represented by its GAZelle model. And it is here where GAZ starts facing a serious challenge from international manufacturers, such as Peugeot, Ford, and VW, as firms seek to respond to urban demand for the passenger vans known as marshrutki, especially in Moscow.

Andrei Rozhkov, a transportation analyst at the Metropol investment company, said that passenger transportation operators are earning higher profits in places like Moscow. “They are able to acquire bigger minibuses for their marshrutka service, and lack of this type of product represents a risk factor for the company,” the analyst said.

Andersson, however, said that the adaptability of GAZ’s vehicles to the Russian market and environment is matched by the company’s adaptability in addressing gaps in its production. A new minibus model, called GAZelle-Next, will begin production in 2013, as will a new light truck for farmers, the Yermak. The passenger seats in the new modified minibuses will increase, from the current 14 to 18, both for modified versions of Gazelles and new Gazelles-Next.

GAZ’s management is still cautious about its future, especially in light of recent financial problems. Rozhkov said that the company had to cut its personnel dramatically in 2008 and 2009, up to several thousand workers, but that the situation returned to normal in 2010, with average salaries currently standing at 26,000 rubles per month ($880), according to GAZ website.

The company’s prognosis for 2012 is for weak growth, though Andersson said that the upcoming Volkswagen and Mercedes-Benz contracts will offer “a chance to upgrade the plant, acquire valuable experience and develop our own model range.” As the company looks to the future, though, it remains conscious of its history. Andersson himself, a Swedish native, is a connection to it, having worked for international companies such as Saab and GM before coming to GAZ in 2009. Foreign experts have played a significant role in the company throughout its existence, but especially around its establishment in the 1930s.

GAZ and foreign workers

In 1929, American automobile manufacturer Henry Ford signed an agreement with the Soviet government to establish mass production of trucks and passenger cars, based on the Ford Motor Company’s models A and AA. The first GAZ factory was opened in 1932, and its first product was the 1.5-ton “Polutorka” truck. At that time, several hundred specialists from the United States and Europe arrived in Nizhny Novgorod – which was soon renamed as Gorky (the name would be changed back following the USSR’s collapse). Production specialists were joined by construction workers and designers from the American architectural firm Austin, which received a $30 million contract to build the factory and liv- ing quarters for the workers—a huge sum for an architectural firm, even by modern standards.

Natalia Kolesnikova, the director of GAZ’s company museum said Richard Austin, a grandson of the company’s founder, visited GAZ in 2010 while writing ‘Constructing Utopia,’ a book about Austin’s role in the early Soviet car industry.
“Several communities of foreign workers and engineers developed there, of about 300 people in total,” Kolesnikova said. Not only the factory, but the entire residential area was designed in the thenfashionable constructivist style, Kolesnikova said.

Shortly afterward, the government’s relationship with Ford deteriorated, and in 1935 fully dissolved. Most of the American and foreign specialists left the Soviet Union, but some engineers and machinists stayed with GAZ. Among these were the Reuther brothers, Walter, Victor and Roy, though they did not stay long after the end of the contract.

Walter Reuther would later found and lead the United Auto Workers union in the U.S..

It is possible that if the Reuther brothers had remained, they would have become victims of the Stalinist purges. Stalin’s security service, the NKVD, targeted the factory in 1938. GAZ’s first director, Sergei Diakonov, was executed. Every workshop boss was also arrested. According to Kolesnikova, dozens of foreign workers, primarily from the U.S., were repressed, and some disappeared forever in the Gulag.

It is still unknown how many foreigners suffered, since many records have been lost – but Diakonov was posthumously rehabilitated in 1956.

With the exception of World War II, when GAZ assembled trucks and off-road vehicles for military use under the U.S. Lend-Lease Program, the company never produced foreignbranded automobiles or trucks after the Ford contract was abrogated. The new foreign contracts which will be starting this year therefore see the company returning to its historic roots.

http://www.themoscownews.com/business/20120213/189451954.html