THE STRATEGIC GOAL IS TO BUILD A MULTI-PROFILE CORPORATIONVoenno-promyshlennyj kurjer newspaper, 20.07.2005
Today the OAO OPK Oboronprom is one of the leaders of the Russian military industry. What tasks are being resolved by the corporation currently? What are the priorities for its development? What has been done and what is to be done? These and other questions are answered in the interview by Mr. Denis MANTUROV, Oboronprom General Director, given to the "Military-Industrial Courier" newspaper.
PERSONAL INFORMATION
Denis Manturov was born in 1969. He is a graduate of the Moscow University, and holds a degree in sociology. In 1997 he received a post-graduate degree of a candidate of economic sciences. In 2000-2002 he studied for the doctor of sciences degree at the Moscow Aviation Institute. In 1998-2000 he was deputy director, OAO Ulan-Ude Aviation Plant. In 2000-2001 he was the commercial director of the OAO Mil Moscow Helicopter Plant. In 2001-2003 Mr. Manturov was deputy chairman of the Federal Enterprise "State Investments Corporation". Since 2003 he is the General Manager of OAO OPK Oboronprom.
QUESTION: Mr. Manturov, what are the strategic goals of OAO OPK Oboronprom?
ANSWER: The strategic goal is to build a multi-profile mechanical engineering and high technologies corporation which would work in a variety of fields. The first area is defense systems, or anti-aircraft defense, which will likely be complemented with electronic warfare and, possibly, transponder/interrogator systems. This is currently being discussed. The second area is helicopters. It will be a holding company which at the first stage would deal with the Mi helicopters, and at the second stage — with the Ka helicopters. Several more areas of work are being reviewed, but it would be premature to discuss those.
Such a structure of a company is built on the analogy with more or less stable world corporations. Three or four areas of activities guarantee a rational diversification of the business which keeps the company afloat economically.
Q.: Are you planning to build the corporation by concentration of considerable amounts of share holdings — from 25 per cent and up?
A.: Of course. We will also get rid of the non-specialized assets. However, as regards to those we only possess 25.1 per cent of shares of the "Sukhoi" Design Bureau. This is a fairly costly asset but we are not planning to build aircraft or become part of the corporation being formed. This asset will be sold or bartered.
Q.: Within what time frame this can become possible?
A.: It is hard to say. We would like to see this happen before the end of this year.
Q.: How is the process of creating a helicopter holding company going?
A.: As you know, the Presidential decree to create a helicopter-building holding company was issued in November of last year. On May 6 the Government issued a resolution to the same effect. Currently work is underway to assess the shares that are to be submitted by the government of the Russian Federation and by the government of the Republic of Tatarstan, as well as by the Rosoboronexport company. This stage, if we meet the deadlines, will continue until September 1. On the 16th of August an extraordinary meeting of Oboronprom shareholders will take place; at that time the stock raise through additional investments will be announced.
What concerns administrative matters, we are working on that issue for over half a year now. There has been formed an expert group consisting of deputies general managers of the enterprises. The group will develop a corporative agreement and determine what the corporate management system of the helicopter holding company should be. This work is likely to be accomplished by September. This does not mean that the entire system will be up and running — this may take another two to three years — however, a certain program will be in place and its implementation will begin.
Q.: Have the doubts of the Kazan Helicopter Plant leadership as to whether the holding company needs to be created been dispersed?
A.: For the period of at least one year we are enjoying fairly productive relationships with the Kazan Helicopter Plant; we were able to achieve mutual understanding and reach agreements.
Q.: In what way helicopter models produced by the Ulan-Ude Plant and the Kazan Plant will differentiate, taking into account that these two enterprises produce fairly similar aircraft?
A.: Unfortunately, we do not have a unique Mi-17 helicopter model. The Ulan-Ude Aviation Plant produces the Mi-171 helicopter, the Kazan Helicopter Plant — Mi-171, etc. This means that each plant produces its own model which has to be certified individually at each of the markets. To exclude duplicate work we are planning to explore previous experience. By way of an example, in Brazil the Mi-171Sh model is certified, so there is no need to certify Mi-172 there. In Chile, on the contrary, we are not going to certify Mi-171, but will rather certify the Mi-172 helicopter. That is, we will assign countries to enterprises. Later, when the corporation is in place, we will develop production cooperation: one plant will produce blades for the whole holding company, another will produce fuselages, etc. It would be too early to describe the final structure of the holding company which will be in place two to three years from now. It is absolutely clear, however, that we will develop inter-enterprise cooperation.
Q.: How will you cooperate with the "Kamov" plants?
A.: It is still fairly hard to make a definite forecast. Everything will depend on the scenario we will follow, and this will not be clear until the end of this year. However, in June at the annual OAO Kamov shareholders’ meeting, myself and Mr. S. Chemezov, General Manager, Rosoboronexport, and Managing Board Director of Oboronprom, were elected to the Board of Directors of the enterprise. This can be considered an important step towards the formation in accordance with governmental decisions of a uniform and integrated helicopter-building industry.
Q.: What is the status of the holding company of enterprises producing electronic warfare assets?
A.: We have already come up with a concept for such a holding. Currently this concept is being reviewed by the Federal Industrial Agency, later it will be submitted to the Ministry of Industrial Energy. Then the coordination with all agencies involved will begin.
Conceptually, the electronic warfare holding company will be created on the same basis as the helicopter-building holding. There will be a decree on adding the shares of the enterprises to the stock of the Oboronprom company. In this field most of the enterprises are either 100 per cent government owned, have the status of a Federal Unitary Enterprise or have the government-owned control stock. This will make things a little easier.
Q.: What is electronic warfare market like now? Currently complex systems are exported, not electronics as such. Does this kind of export have any prospects?
A.: This is a very promising field. Over the past 15 years we’ve never been able to sell such systems to India, however last year the first contract to ship electronics to India was made. India is not a unique example, either. There are other countries in South-East Asia (e.g. Malaysia) as well as in Latin America, which would like to purchase Russia-made electronic warfare systems.
Q.: How successfully and in what areas you are contacting with the "Almaz-Antei" anti-aircraft concern?
A.: We cooperate in the C-300 area, there are certain prospects of cooperating as regards to the "Triumph" system. On the whole, we have very productive relations and enjoy complete mutual understanding.
Q.: How do you build your relationships with Rosoboronexport which is a co-owner of Oboronprom?
A.: Currently Oboronprom is 50 per cent owned by Rosoboronexport and 50 per cent owned by "Rosimuschestvo" (Russian Federal Property Agency). Upon additional shares issuance the ownership scheme will somewhat change: 51 per cent will be owned by "Rosimuschestvo", a large allotment will remain with Rosoboronexport and a certain portion will stay with the Government of the Republic of Tatarstan (depending on the assessment of Kazan Helicopter Plant share holdings). However, at the annual shareholders’ meeting Tatarstan Prime Minister Rustam Minnikhanov has already been elected to the board of directors of Oboronprom.
As for our current relationships with Rosoboronexport, we are cooperating with them in all export-related areas. I could say we work in a tandem. This applies to anti-aircraft defense and to our final product — "Pechora-2M", helicopters. During the three recent years our helicopter plants were able to survive primarily due to Rosoboronexport which was selling these products abroad.
Q.: What are your relationships with the General Manager of Rosoboronexport Sergey Chemezov? You are a leader of a younger echelon and he is part of the older team.
A.: I do not consider Mr. Chemezov a part of the older team. He has modern views and possesses huge expertise. In my opinion he is a brilliant example of a new, modern leader.
Q.: Apart from helicopters, Ulan-Ude Aviation Plant also produces "Su" attack aircraft. Do you plan to export those or they are manufactured primarily for the internal market?
A.: Yes, we plan to export Su-25 and Su-39. Unfortunately, Russian government is not planning to purchase any "Su" attack aircraft in the near future. However, the Su-39 work is provided for by the budget and is being implemented as planned. As for Su-25, it has good export potential. I will not name the countries, but Latin America is very interested in purchasing such aircraft. In the nearest future we expect to receive purchase requests for approximately 20-25 modernized Su-25 aircraft. Many countries would like to purchase Su-39, but the tests are not yet over, and this will take additional 1.5 to 2 years.
Q.: Recently a tender was held to purchase the shares of "Kurganmashzavod" which were being sold by "Sibur". Did Oboronprom show any interest in these assets?
A.: No, we did not have any interest in those. I was a member of the managing board of the company, and this might have led to rumors about our participation in the tender. The role I had to play as a member of the managing board was successfully fulfilled. Due to joint efforts of Rosoboronexport and "Sibur" the economics of the enterprise improved over the last year.
Q.: What is the status of "Pechora-2M" contracts?
A.: Currently a contract is underway with one the countries of the Middle East to supply them with "Pechora-2M" anti-aircraft system. The overall amount requested is 25 systems. Also, in the beginning of July test demonstration fires were conducted for representatives of an Asian country.
Q.: Will Oboronprom’s stock flotation be made public eventually?
A.: If the government as the main shareholder profits by public stock flotation and this proves to be good for the development of the company, the stock flotation can be made public. However, this will not happen until 3 to 5 years from now.
Q.: What is your assessment of Oboronprom’s recent participation in the Le Burge airshow?
A.: I think it was very successful. I held negotiations with the Prime Minister of the Republic of Tatarstan Mr. Rustam Minnikhanov, with representatives of largest world helicopter-building and maintenance companies, met with Mr. Steven Finger, president of the U.S. helicopter company Sikorsky. This enterprise, being one of the shareholders of the Moscow Helicopter Plant, is part of the United Technologies Corporation (UTC). UTC is a large corporation which includes Pratt & Whitney engine-building enterprise. The negotiations showed that our American colleagues are ready for serious and multilateral cooperation with us. Both sides are being guided by pragmatic interests.
We are conducting negotiations with UTC on possible installation of Pratt & Whitney engines on certain "Mi" helicopters, in particular, on Mi-38. As our survey shows, in Russia they do not manufacture engines for this type of helicopter, yet. They recognize it at the Petersburg "Kamov" plant where they make helicopter engines. For the same reason the "Kamov" firm selected the Rolls-Royce engines for its "Ka-226" helicopter. What concerns the RRJ aircraft, the engines are manufactured jointly with a French company. Lack of alternatives in Russia compels Russian aircraft manufacturers to seek other variants on Western markets.
In its turn, UTC, as a business, is interested to gain profit on its investments. The Sikorsky model line lacks certain types of helicopters which are pre-production for us. This is why it is to their advantage not to start their own project from scratch, but rather equip our models with engines of their manufacture and promote such models jointly harvesting adequate profit. The same interest pushes the American companies to work with us in possible creation of joint "Mi" helicopter service centers. On our part it is "business as usual" which has nothing to do with "selling our Motherland out", as some allege.
Whether we like it or not, modern business is being determined by economic globalization, in which the major role is played by transnational corporations. Our goal under these conditions is to establish multilateral cooperation with Western companies while focusing on our own profits and standing up for national interests.
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