Exclusive interview with Mr. Vadim Sorokin, President and Chief Executive, GAZ Group.

AT: Mr. Sorokin, it is known that GAZ has gained popularity thanks to cooperation with foreign partners. What has GAZ achieved for today working with its foreign partners?

 Indeed the Gorky automobile plant was built using the American experience in mass production. The technological and construction engineering was carried out by Soviet specialists in close collaboration with the Ford company. Its architectural and construction project was developed by Austin & K. The first models of cars GAZ-A and GAZ-AA were built according to the drawings of Ford. Despite this, they were somewhat different from the American prototypes: the Russian version had reinforced clutch and steering. Later, the design team of GAZ, taking into account the experience, refused to copy the American models and began to develop its own design school, which later became a source of manpower for the whole of the Soviet and Russian automotive industry.

GAZ today creates its own models of light commercial vehicles and medium-duty trucks, developing them according to the operating features required in hard road and adverse weather conditions, with the reserve for overloading and easy to maintain. At the same time, we are actively using the technologies of the global leading manufacturers of automotive components – our suppliers, conducting joint testing and adaptation of different systems and components for the new models.

GAZ has one more area of its activities, i.e. contract manufacturing for global OEM’s Mercedes and Volkswagen. Starting from 2013, we have been producing VW Jetta, Škoda Octavia and Škoda Yeti cars, as well as Mercedes-Benz Sprinter vans. While implementing these projects, we are learning the best practices of the international automotive industry that we use for manufacturing our own product range. During the tour at the Gorky Automobile Plant, you saw that we are producing Gazelle vehicles and Mercedes vans in the adjacent lines on the same site. They are built by the same people based on the same standards. Together with Volkswagen, we have built a training center in Nizhny Novgorod where our workers improve their skills needed for all major manufacturing operations. In addition, we upgraded GAZ facilities by investing more than 500 million euros together with the partners into the new assembly and body shops, the new painting complex, into the improvement of the logistics and the quality control systems.

AT: Currently, which segments of GAZ business bring most of the profit: cars, trucks or specialized vehicles?

GAZ specializes primarily in the production of commercial vehicles that constitute the bulk of the company revenue. And the production of specialized vehicles is also a very important direction for us that we have been actively developing in recent years. More than 300 derivatives of specialized vehicles are built on the platforms of our vehicles. These are thermal insulated box vans, mobile garages, mobile shops, drop-side trucks, tow-away vehicles, fuel and food tanks, hydraulic lifters, fire-fighting vehicles, school buses, ambulances, and many other types of vehicles for business, social institutions, public utilities.

Easiness of adaptation of different superstructures to our vehicles gives us a serious advantage when entering new export markets. For many countries, it is an attractive form of such cooperation when we deliver the chassis while local companies build specialized vehicles on their platforms. Such mutually beneficial cooperation with our partners allows us to consider the specifics of local markets and to increase the sales volumes, and also to create new jobs, which is important for the state from the social point of view.

AT: During the plant tour, I was surprised by the order on the shop floor, the accuracy and coordination of workers’ movements. There is a well-known fact that manufacturing process at the car plants in Soviet times left much to be desired. The dirt, the mess around the work stations, the downtime – such perception from the Soviet era is still preserved even till now. Here I have seen that everything was organized and working like a single coherent mechanism. How did you achieve this?

GAZ started work on creating a production system that allows us to achieve high productivity and eliminate waste in the production, in 2003. Then our shareholder Oleg Deripaska had studied production technology at Toyota factories and decided to implement the basic principles of lean production at our facilities. Standardization of work stations is the underlying tool that allowed us to achieve great progress and later became the know-how of GAZ Group. We started with the assembly line of Gazelle cabins, created a pilot area where you could clearly see the losses, evaluate them and eliminate then. Then, these areas were created in the welding, painting, assembly of the vehicles, in the production of automotive components. As a result, it reduced the number of unnecessary walks and the time of the work cycle. The components started to be delivered to the assembly operators just in time in special containers and placed on the comfortable racks so as not to clutter the workspace. As a result, downtime was eliminated, the number of defects was significantly reduced, the working conditions and the production culture improved. In general, the system of lean production has enabled us to achieve increased productivity fourfold.

Today this experience is taken over by our partners, suppliers, dealers. In recent years, the training in the GAZ production system tools has been provided to more than 2 thousand of our partners, today it allows them to save millions of rubles and to reduce logistic cost.

AT: In the last ten years, the global automotive industry has been growing very rapidly. The completion in the markets is very serious. Can you predict the role GAZ will play in the local and regional markets in the next five years?

 The Russian car market is now one of the most open in the world. The import duties on the cars in Russia are lower than in most countries of Asia, North Africa and twice lower than in the EU. Therefore, in the Russian market today, we compete with all the major world producers. Amid this fierce competition, GAZ has been holding 50% market share for many years in the segment of light commercial vehicles and more than 65% in the segment of medium-duty trucks.

Our advantage is that the vehicles we produce are tailored for customer’s needs. Our product engineers design the cars within stringent limits in terms of their price, cost of ownership, functionality and technical solutions. The vehicle must give the customer the opportunity to earn money and pay off quickly. The customer or the driver should not get tired behind the wheel, that is, there should be good drivability, a comfortable place for the driver. Service should not be expensive or complicated. There is a need of good maneuverability in narrow streets or warehouses.

We understand that customer requirements to the comfort, functionality, reliability are constantly growing, and we are not standing still. We have created a range of new generation models NEXT with excellent ergonomics and car-like handling. While maintaining a non-killable frame structure capable to endure off-road and overloading, we also put in a powerful engine. The independent front suspension, on the one hand, provides excellent direction control. On the other hand, it is very endurable, really like that of a big truck. At the same time, we were able to keep the cost of the car 20-30% lower than that of imported similar products, its maintenance is cheaper by half, and consumables and spare parts are several times cheaper.

We realize it would have been pointless to invest into a new vehicle, counting on the sales in the Russian market only. We already occupy the leading position on it, and it is too small for us. Therefore, the design of the cars we develop meets the requirements of the export markets. Today, we export about 20% of our products, in 2020 we plan to increase this share up to 50%. And it is very difficult because it is not enough just to come to the market with a good product. It is necessary to organize affordable service, supply of spare parts, to provide support to the client for the duration of use of the vehicle. Therefore, we are looking for the best ways of cooperation with local companies to whom we provide all the necessary technologies for the distribution and assembly of automobiles.

AT: How important is the market of Azerbaijan for you today?

It’s very important because it has a great capacity in terms of demand for commercial vehicles for cargo and passenger transportation, construction and public utilities. It was not for nothing that Azerbaijan became the first country in the CIS where we showed our newly developed Gazelle Next panel van. This one, and our other models were demonstrated at the International Exhibition “Transport, Transit and Logistics” held in Baku in May, and we saw the interest of the transport companies and other potential clients. Today we are looking for partners in Azerbaijan for the distribution of vehicles and we are confident that it will be a successful long-term cooperation based on mutual respect and professionalism.