Gm and Avtovaz of Russia
GM and AvtoVAZ of Russia
Introduction
In June of 2001 General Motors and AvtoVAZ were sitting down to finally negotiate a deal that they had originally made in 1999. The joint venture was to see the two companies jointly build and sell Chevrolets in the Russian market. The Russian market was expected to boom and account for a significant share of global growth over the next decade. This was also a step forward to help revive the economy in postcommunist Russia.
GM founded in 1908, was the largest automaker in the world. GM had managed operations in over 50 countries and sold over $160 billion in sales with $4.4 in profits alone in the year 2000. GM did have problems of its as their market share had diminished to a mere 13.6% of the global market share with Ford nipping at their heels with 11.9% and Volkswagen with 11.5% market shares respectively. Russia at the time was considered an unclaimed territory that all automakers had their eyes on and wanted to enter.
AvtoVaz on the other hand was Russia’s number one auto manufacturer trying to benefit from the expertise and capital that comes for the Western automotive companies. AvtoVaz had a strong need and desire to acquire Western-manufacturing practices, so they could finally be able to export automobiles from Russia and gain the reputation of other international automobile manufacturers.
The European Bank of Reconstruction and Development (EBRD), viewed the $332 million dollar project as a key to revitalize the ailing automotive sector of Russia.
Key Issues
* Hopes of Revival * Disputes * Fall in Profits
Hopes of Revival
Richard Wallis, the senior advisor of EBRD had high hopes and expectations as he thought the joint venture would lead to a major revival of the auto industry in Russia. "It was the first auto major setting up production in Russia after the fall of communism and, of course, the hopes were for GM 's suppliers to follow in GM 's footsteps. These goals have not
Introduction
In June of 2001 General Motors and AvtoVAZ were sitting down to finally negotiate a deal that they had originally made in 1999. The joint venture was to see the two companies jointly build and sell Chevrolets in the Russian market. The Russian market was expected to boom and account for a significant share of global growth over the next decade. This was also a step forward to help revive the economy in postcommunist Russia.
GM founded in 1908, was the largest automaker in the world. GM had managed operations in over 50 countries and sold over $160 billion in sales with $4.4 in profits alone in the year 2000. GM did have problems of its as their market share had diminished to a mere 13.6% of the global market share with Ford nipping at their heels with 11.9% and Volkswagen with 11.5% market shares respectively. Russia at the time was considered an unclaimed territory that all automakers had their eyes on and wanted to enter.
AvtoVaz on the other hand was Russia’s number one auto manufacturer trying to benefit from the expertise and capital that comes for the Western automotive companies. AvtoVaz had a strong need and desire to acquire Western-manufacturing practices, so they could finally be able to export automobiles from Russia and gain the reputation of other international automobile manufacturers.
The European Bank of Reconstruction and Development (EBRD), viewed the $332 million dollar project as a key to revitalize the ailing automotive sector of Russia.
Key Issues
* Hopes of Revival * Disputes * Fall in Profits
Hopes of Revival
Richard Wallis, the senior advisor of EBRD had high hopes and expectations as he thought the joint venture would lead to a major revival of the auto industry in Russia. "It was the first auto major setting up production in Russia after the fall of communism and, of course, the hopes were for GM 's suppliers to follow in GM 's footsteps. These goals have not
Cited: Kramer, Andrew E. "For G.M. in Russia, Parts Dispute Is Only a Start." The New York Times. 21 Feb. 2006. Web. 6 Nov. 2011. <http://www.nytimes.com/2006/02/21/business/worldbusiness/21motors.html?ref=avtovaz>. Lyne, Jack. "With $140 Million from EBRD, GM Signs $340 Million Russian JV - Site Selection Online Insider." Site Selection Online. Web. 06 Nov. 2011. <http://www.siteselection.com/ssinsider/incentive/ti0108.htm>.