GAZ Officials Hope Aveo Launch Just Beginning of GM Ties

NIZHNY NOVGOROD, Russia – GAZ Group’s new Chevrolet Aveo assembly line is committed to hitting a 2-shift capacity of 150 cars daily in April, President and CEO Bo Andersson says.

Speaking to reporters following the Job One ceremony today, Andersson says the Aveo program, slated to run for eight years, could be just the beginning if the Russian auto maker hits its targets.

“It’s an 8-year contract, but we must earn that trust,” he says. “We must hit 150 cars a day in April. (And) we must have the best quality and the best productivity (of any Aveo plant worldwide). If we do that, General Motors is sure to give us another vehicle.”

Siegfried Wolf, chairman of GAZ parent Russian Machines, agrees, saying once the program unfolds, “I think (GM) will want us to build a third or fourth car.”

Capacity for the Aveo complete-knocked-down operation is eight units an hour, with output getting under way officially today at 48 cars per day on one shift. The addition of the second shift will take that to 150 cars a day within the next two months, with GAZ and GM planning for 30,000 units to come from the plant annually.

Production is launching with Aveo sedans, but GAZ will roll in hatchback models in the spring. Sales are expected to run 70%-80% in favor of the sedan, which at RR454,000 ($15,100) is priced below the RR537,000 ($17,800) hatchback.

Andersson says a third shift could be added to increase output by 15,000 units annually, if demand – and client GM – dictates.

The Aveo line is housed in the plant that started vehicle production for GAZ back in 1932, building trucks based on Ford’s Model AA. The tooling used to produce the small Chevrolet largely has been repurposed from the Russian auto maker’s ill-fated Siber sedan, rolled out in 2007.

The Siber, based on previous-generation Chrysler Sebring tooling purchased from the Detroit auto maker, was the last Volga-branded model built by GAZ.

The sedan was a huge flop in the market here, and production was suspended soon after launch. In January 2010, Andersson joked in a speech in Detroit that “with the amount of vehicles we sold, we would have had enough spare parts to last until 2050.”

GM and GAZ invested a combined $29 million in tooling up for the Aveo. About 700 people will be employed on two shifts to build the car, using stampings and other components imported from GM Korea.

Workers were trained at GM facilities in Korea and St. Petersburg.

The 32,292-sq.-ft. (3,000-sq.-m) operation here offers a mix of manual and automated processes. Underbody welding is done by hand, for example, but the rest of the body-welding process is automated, using 87 robots to complete the framing process.

All welds are put through an ultrasonic test to ensure their viability, and completed cars go through dynamometer testing and a water test to ensure they are leak-free.

Some cars enter the plant’s Global Customer Audit room, where workers check for quality issues such as misaligned panels and other defects, then determine fixes needed back on the line to prevent them from reoccurring.

Bodies are painted in an adjoining shop along with Skoda Yeti cars, assembled in a separate, more automated facility here under a contract with Volkswagen. The paint shop will be at capacity with the GM and VW programs, with the latter including plans to add assembly of the VW Jetta and Skoda Octavia.

In addition to welding, painting and assembly, the GAZ plant performs subassembly of doors, instrument panels and suspension systems using parts from Korea. Andersson says local content for the operation is rated at 30% now, “and we’ll get to 50% if everything goes right.

“There’s always a tradeoff in cost and benefits, so we won’t be competitive with high-investment parts,” he says. “On others you can save on logistics, and I tell my people we could even export back to GM (if the cost equation is made favorable).

“But first we’ve got to get to 150 cars a day, then we’ll look at localization.”

GM says it needs the GAZ operation, the only European plant to build the Aveo, to serve the quickly growing Russian market. Last year, Chevrolet sold 24,513 Aveos here, including 20,869 sedans.

“In 2012, Chevrolet was the most popular foreign-car brand in Russia for the sixth year in a row,” says Jim Bovenzi, president and managing director of GM Russia, who also says he sees an upside for the Cadillac brand here. “That’s another area I’m working on.”

Cars built at Nizhny Novgorod all will be sold in Russia, though GM doesn’t rule out supplying other Commonwealth of Independent States countries from the plant in the future.

The GAZ factory is the fourth in Russia building GM vehicles, including the Detroit auto maker’s wholly owned facility in St. Petersburg, joint venture in Togliatti with AvtoVAZ and semi-knocked-down operation in Kaliningrad.

GM produces 90% of what it sells in Russia locally, says spokesman Sergey Lepnukhov.

Andersson says it took 20 months to convert the Siber line to Aveo, update the paint shop and meet GM’s tough quality demands.

“(But) the last 20 months was the easy part,” he tells workers at the Job One ceremony. “Today, reality begins, because GM will begin to look at our quality and production against four other Aveo plants worldwide.

“Our target is clear: We want to be the best.”

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