General Motors and AvtoVAZ Questions

General Motors and AvtoVAZ Questions

Why do GM and AvtoVAZ need each other to build and market the Niva?

On the 27th of June 2001, an agreement was signed among the representatives of General Motors (GM), AvtoVAZ and the European Bank for Reconstruction and Development (EBRD). The joint venture was founded in the Constituent Assembly that was held on the 30th of July 2001, and was officially registered on the 2nd of August 2001. The main objectives of this establishment between GM and AvtoVAZ were the defining factors for the need of both organizations to form this joint venture (Moffett, Inkpen, 2012). Following were the objectives of both the organizations for the initiation of this joint venture:

The General Motors wanted to become a major player in the automotive markets in Russia and CIS, producing quality vehicles at competitive and affordable prices.

Both the organizations wanted to introduce the culture of quality.

Both the organizations wanted to implement a system of high production and supply at a low cost.

Strengthen the confidence of Western companies in the Russian business;

Attract investment in the Russian automotive industry (Moffett, Inkpen, 2012).

Why can't AvtoVAZ build and market the Niva on its own?

Niva has been manufactured by AvtoVAZ, since September 2002 when the GM-AvtoVAZ Chevrolet planned successor to the Lada Niva, which is still built in parallel at AvtoVAZ. Back in 1998, the prototype was presented and since 1997 efforts were being made to produce this model in series (Vincent, 2004). However, due to financial problems, poor quality and lack of equipment options, only a total of 2123 Lada Niva cars were produced from the year 1998 to 2002, in small batches (Graeme, Wormald, 2004). With the joint venture of GM AUTOVAZ, the production of the vehicle was taken over and produced as Chevrolet Niva, one of the most favorite cars of the years 2004 and 2005 (Aervitz, 2009). In September 2009, the Chevrolet Niva model year received a major overhaul and a new occurrence. The exterior has been modified and modern elements were adapted. The interior was completely redesigned and adapted to Western standards. The engines, however, remained unchanged. A sale to Europe of the new Nivas was thus conceivable, but due to huge demand from the CIS countries, this eventually did not happen. Plans were developed, considering the production of the current face-lifted version in the Ukraine by the AvtoZAZ for the Eastern European market, as well. The company decided that it could also be a small number of the vehicle being exported to Western Europe if made possible. America is already open as a possible target market, where Lada has its own dealer network. With a closer collaboration between Chevrolet and AvtoVAZ, there were hopes to also be able to increase sales and accordingly consolidate the joint venture for good. During the year 2009, the Chevrolet Niva received the award for SUV of the Year, after the introduction of the current face-lifted version. Therefore, it can be said that due to the lack of financial ...