Auto components business a «win-win», says GAZ

SF: Russian Machines Chief Executive Manfred Eibeck tells Automotive World that the auto component business presents «a win-win» for GAZ Group and its partners

As well as producing its own vehicles and contract manufacturing several models for other OEMs, GAZ Group also has its own in-house auto component capabilities.

Speaking to Automotive World, Manfred Eibeck, Chief Executive of Russian Machines, the holding company of GAZ, explained that the joint ventures (JVs) formed through its auto component business present «a win-win» for GAZ and its partners: «If you have no business, you do not have many friends on the board. However, through a JV you automatically get business. We will not become a global Tier 1 or Tier 2, this is not our goal, but these JVs are helping us to reduce costs, especially on the development side.»

Bosal-GAZ a key JV

In 2012 GAZ Group and Bosal, a global manufacturer of exhaust systems, developed a joint venture with the aim of supplying exhaust systems to GAZ vehicles as well as other OEMs at the GAZ production site. Automotive World spoke to Kirill Epshteyn, Director of the auto components division, GAZ Group, during a tour of the Bosal-GAZ plant to discuss the benefits of serving as GAZ’s internal Tier 1 supplier.

A joint investment of more than €4m (US$4.48m) was used to establish a semi-automated catalyst line, and a separate semi-automated exhaust line. Initially, the JV supplied exhausts purely for the GAZelle light-duty commercial vehicle (LCV). The following year a new line of products was put into production for the GAZon NEXT medium-duty truck, which is produced in the same plant.

Epshteyn was keen to point out that the quality of products coming out of the plant are on par with other European suppliers: «Parts per million (ppm) is below 20. We believe this is a fairly good European level of performance. After proving ourselves as a stable and high quality supplier, we decided to take the next step and quote a global player like Volkswagen,» said Epshteyn. However, he noted that «it was a totally different product, because an exhaust system for a passenger car is a more sophisticated and state of the art product than a light commercial vehicle (LCV) or truck exhaust. We had to make additional investments.»

Branching out

Starting in 2013, Bosal-GAZ became a regular supplier to VW and Skoda, providing exhausts for the Yeti, Octavia and Jetta, all of which are contract manufactured by GAZ. Although he refused to explain in more detail, Epshteyn advised that the auto components division plans to expand its product range: «That’s not the end of the line; we have some more products in the pipeline.»

At the start of the Bosal-GAZ JV, all components were supplied to GAZ vehicles. This figure is now 60%, with 40% going to VW and Skoda models in Russia. «We are trying to increase the number of other customers so that this figure is no less than half, without losing GAZ volume,» said Epshteyn.

If production volumes increase to levels registered during GAZ’s best years, will the auto components division be able to continue supplying other OEMs? «Easily,» he stated. «This is a very flexible production facility. Today we are running in one shift, and if need be we know perfectly well how to double the shifts, and we can do that ramp up in no time. We will be happy when and if GAZ increases the volumes. Are we waiting to pounce? Absolutely.»