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Putin Ally Axes the Swedish CEO of Russia’s Largest Carmaker

Renault Buy Stake In Makers of LadaRenault Buy Stake In Makers of Lada
The Russian state is right behind you, Monsieur Ghosn.Photograph by Epsilon/Getty Images

Russia’s largest carmaker has no doubt who’s to blame for its collapsing sales.

It’s not the country’s foreign policy, which has led to it being cut off from western capital markets; not its macroeconomic policy, which has left it at the mercy of international oil prices even after 15 years of promises to reduce that dependence. Nope. It’s the Swedish CEO’s fault.

AvtoVAZ, the company behind the famous Soviet-era Lada brand, is ditching chief executive Bo Inge Andersson after its annual operating loss tripled to over $1 billion in 2015, the third year in a row it has lost money despite substantial investment by the Franco-Japanese alliance Renault-Nissan over the last six years.

Nissan and Renault have invested over $2.3 billion in AvtoVAZ since 2008. At the time, Russia was slated to become Europe’s largest car market, ahead even of Germany. But the collapse in the price of oil, Russia’s biggest revenue earner, along with western sanctions have devastated the market, with new car registrations falling by 36% in 2015, according to figures from the Association of European Businesses in Russia.

After a series of capital injections, Nissan and Renault own 67% of a joint venture that, in turn, owns 74.5% of AvtoVAZ. But real power at the company is still wielded by its joint venture partner Rostec, a state-owned holding that bundles together various industrial investments, particularly in the defense sector. Rostec is headed by Sergey Chemezov, one of the many Russian officials banned from entering the U.S. by sanctions imposed by the Obama administration after the annexation of the Ukrainian province of Crimea in 2014. Chemezov’s links to President Vladimir Putin go back 30 years to when the two were both serving as Soviet officials in the former East Germany.

Chemezov told The Wall Street Journal in an interview published Friday that Andersson will be “relieved” later this month at a board meeting, and that Renault will designate his replacement.

Chemezov criticized Andersson for going too far in outsourcing components from foreign suppliers, something that spread local job cuts far beyond the company itself. Similar steps at Andersson’s previous company, GAZ Group, had made a heavily loss-making company profitable again.

“The tension was building up” in the company’s home town of Togliatti on the Volga, Chemezov said. “I told him several times to be careful, but he didn’t understand.”

Rising unemployment and falling living standards are creating a difficult environment for Putin as his party, United Russia, prepares for general elections in September. In the past, voters have been more inclined to register protest votes against the party, which is widely seen as corrupt, than against Putin himself. At the last elections, in 2011, its share of the vote fell by 15 percentage points to just over 49%, although it still ended up with a comfortable majority.