Gm and Avtovaz of Russia

1147 Words Apr 13th, 2012 5 Pages
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In June of 2001 General Motors and AvtoVAZ were sitting down to finally negotiate a deal that they had originally made in 1999.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%
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Doing business with AvtoVAZ would allow GM to produce a high volume of automobiles for a much cheaper cost.

2. What institutional or industrial factors continue to make the Russian automobile market so difficult to compete in?
Legal issues and the government were the two factors that made it hard for and company to invest interest into the Russian auto industry market. In July of 200 the Russian Tax Police accused AvtoVAZ of tax fraud. The accusations did not look god for the largest automobile manufacturer in Russia. They were accused of falsifying and under reporting vehicle identification numbers. The legal troubles and the way the government tried to intervene did not promote a positive image for AvtoVAZ.

3. What strengths does AutoVAZ bring to the joint venture and what does GM bring? Are they a good fit? Why or why not?
AvtoVAZ had to main strengths. The first strength being the Niva SUV and the other strength being that they were already the largest automobile manufacturer in Russia. General Motor’s strengths were that of the companies’ success and willingness to enter a Russia market that could either be a big success or complete failure. They seemed to be a good fit as AvtoVAZ was going to be able to produce more cars with the help of General Motors and would be able to finally establish as an international manufacturer.

4. As a potential partner, what challenges does AutoVAZ present to General Motors and how has GM managed to

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