In Russia, Bo Andersson Still Knows Data

DETROIT – Bo Andersson is back, and his command of facts, figures and pertinent details about his company is as strong as ever.

The former General Motors vice president in charge of global purchasing, who settled many supplier disputes with an almost-supernatural grasp of quality-control metrics and data spreadsheets, left the auto maker in spring 2009 while it was in bankruptcy.

Today, the 57-year-old Andersson is president and CEO of GAZ Group, which produces buses, commercial trucks and military vehicles in Russia. Upon accepting the job in 2009, he took drastic steps to give GAZ a fighting chance at profitability, the most unpopular of which was the elimination of 50,000 jobs, including 10,000 in management.

And for the past three years, he has been turning the company upside down, winning new contracts, renovating plants, investing in state-of-the-art equipment, demanding better productivity, training workers on the latest manufacturing techniques and ushering the company into modern methods of transparent business operations.

Most significantly, he ended passenger-car output at GAZ but now is in the process of reinstating production as a contract assembler for Volkswagen and GM.

Along the way, Andersson has won more friends than enemies. He has fired 40 top-level managers on corruption charges and publicized the messy details in each case.

The line workers have appreciated this top-down purge but not nearly as much as the profit-sharing program he started once the company came out of the red.

“Now is the third year we pay out profit sharing,” Andersson tells WardsAuto on the floor of the North American International Auto show here. “For last year’s performance, we will pay out roughly $60 million to our 50,000 employees.”

For many employees, that will mean an extra one or two months’ salary. “For managers, it can be six months to a year of extra salary,” he says, adding that average pay for laborers amounts to about $700 a month.

As GAZ’s balance sheet improves, some quarters of the company suggest it is time to begin adding jobs. But Andersson says otherwise, and he has the quantitative data to back it up.

“I say we cannot hire because we don’t have the right productivity,” he says. In some of its plants, GAZ achieves decent productivity (about $8,000 in revenue per employee each month), competitive with some Western European manufacturing operations.

“That’s roughly $100,000 per year in revenue per employee,” Andersson says. “But our light commercial-vehicle plant in Russia has $360,000 in revenue per employee per year. And that’s 2.5 times better than in 2009.”

Russia is a good fit for Andersson. Having grown up and served in the military in Sweden, before graduating later from Stockholm University and Harvard, he seems to thrive in severe environments, as long as he has the latitude and authority to take action to better the organization.

He joined GM in 1987 as a manager with Saab and a decade later became vice president-purchasing for GM Europe. Within two years, he was moving to Detroit to take the reins of worldwide purchasing.

The GM post was treacherous at times as bickering about prices of steel, resin and other raw materials spilled over into the media. Andersson also restructured the procurement department and demanded more accountability from his purchasing agents and GM’s suppliers.

But he kept his sense of humor. When a supplier executive at an automotive conference in Greenbrier, WV, made an off-the-cuff remark describing GM’s purchasing chief as a vampire intent on sucking the supply base dry, the amused Andersson scoured the region for a costume store and attended the banquet that night dressed head-to-toe as Dracula.

Although manufacturers in Europe generally are struggling, Andersson says GAZ “had a very good year” in 2012, with earnings before interest and taxes likely to reach 9%, up slightly from 8.8% in 2011.

“When I came in 2008, we lost $1 billion,” he says. “That was like 20% negative margin.”

Prospects are upbeat in Nizhny Novgorod, where GAZ is based and operates 13 plants. In the past 16 months, GAZ has renovated 2.7 million sq.-ft. (250,000 sq.-m) of factory space for passenger-car projects with VW and GM and for Daimler commercial vehicles.

GAZ began SKD assembly of the Skoda Yeti in 2011 based on kits shipped in from Czech Republic. One month ago, the SKD work was replaced by full-vehicle assembly, thanks to new body and paint shops.

Investments have been shared by VW and GAZ, which together have spent $250 million. VW paid the majority, 60%, and owns the equipment in the new body shop. GAZ retains the conveyors inside the body shop, as well as generic assembly equipment.

GAZ has a similar 8-year arrangement with GM for assembly of the Chevrolet Aveo. Both VW and GM will share an automated body shop to reduce cost.

GM benefits from redeployment of the old assembly lines GAZ purchased from Chrysler’s Sterling Heights, MI, plant to build the previous-generation Sebring, known in Russia as the Volga Siber, from 2008 to 2010.

“The joint investment for GM and GAZ was only $5 million because we could reuse the body shop, the welding lines, and the buildings were in much better shape,” he says.

Within the next several months, GAZ also will begin assembling the Volkswagen Jetta, Skoda Octavia and Daimler Sprinter commercial van.

In 2013, Andersson expects production for VW and GM to reach 150,000 units and for Daimler van output to exceed 5,000 units.

Next year, “we will be at full capacity if all goes well,” he says. “We will be able to produce roughly 200,000 passenger cars, which means we will be the largest production site in Russia for passenger cars and light-commercial vehicles.” The 2014 tally could reach 350,000 vehicles.

All vehicles are for the Russian market and not intended for export.

But Andersson sees these initial VW launches as an important trial for GAZ: If vehicle quality is high and productivity targets met, he hopes VW will consider allowing the contract assembler to supply Jettas for Western Europe.

Currently, all Jettas sold in Europe come from Mexico or China.

No longer fixated on cost control with component producers, Andersson says he has learned much in his new job. “I now know,” he says, “that sales and retail pricing is more fun than purchasing.”

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