“THE MARKET APPROVED IMMEDIATELY OF OUR ENTRY TO THE PERM ENGINE-BUILDING COMPLEX”Engines-2008 Survey (published by Aviation Transportation Survey for the Engines-2008 exhibition), 16.04.2008
The launch of the consolidation of engine-building assets was one of last year’s main events in the Russian aviation sector. Andrey Reus, director general of Oboronprom, told “Engines-2008 Survey” about the role of his company in the consolidation of the sector, its initial accomplishments and plans for the future.
- The plan for the consolidation of engine-building assets, adopted in August 2007, foresaw the creation of four integrated structures, but now we are talking about only three holdings. How should we understand this change of plans?
- The Russian President held consultations in August of last year in St. Petersburg, and it was decided to integrate the enterprises involved in the design and production of gas turbine engines through the creation of a few holdings, by way of increasing the government’s shareholdings in these companies.
- The first integrated structure, Dvigateli-NK, was to unify the enterprises of the Samara engine-building cooperatives. The second structure was to include the Perm engine-building enterprises along with JSC NPO Saturn and JSC Ufa Engine-Building Association (UMPO). Our company was defined as the center for this integration, in view of the necessity of consolidating privately-held shareholdings such as the enterprises of the Perm complex, along with NPO Saturn and UMPO. The third holding was to include JSC Klimov and the Chernyshev plant. The Salyut holding was to be the fourth structure, and the President signed a decree with respect to Salyut right then in August.
As the planning for the formation of these integrated structures progressed, the government concluded that the “Dvigateli-NK” holding could not survive on its own, and should be folded into the holding that would include the Perm and Samara clusters, Saturn and UMPO. This idea received the President’s support.
Upon further examination, it was found that the Samara cluster of enterprises were in catastrophic shape, both financially and in terms of their production facilities. Kuznetsov SNTK, which was supposed to form the core of the Dvigateli-NK holding, was close to bankruptcy, and some of its assets had already been seized by its creditors. Power supplies to the enterprise had been cut off, and employees had not been paid wages for nine months.
The situation at Motorostroitel, another factory in Samara, was not quite so bad, but it too was shouldering an increasing debt load and was prone to slippages in the implementation of contracts for its main clients – Gazprom and Rokosmos – all of which put into question the viability of the company and the holding as a whole. I would add that the production of these companies is of strategic importance for Russia.
- What is Oboronprom’s role in the Russian engine-building sector consolidation process?
- Aside from its role as the center for the integration of one of the engine-building groups, Oboronprom is taking on several large-scale challenges with respect to the shareholdings that it has received.
For example, Oboronprom is acting as a crisis manager for the Samara cluster of firms. We were able to resolve the most difficult problems facing SNTK: the government allocated 676 million rubles for the financial sanation of the enterprise, covered the wage arrears, revived current project and concluded new contracts with Gazprom. Together with Roskosmos, we brought the financial situation of Motorostroitel, which had become desperate under old management, back into shape, and are filling the company’s depleted order book.
The situation is stable with respect to the enterprises of the Perm engine-building complex. Now the main task is to increase the efficiency of production and to reduce costs. Our entry into the Perm engine-building complex was greeted positively by the market. We signed a strategic partnership agreement with the United Aircraft Building Corporation for the development and production of the PS-90 family of engines and have already received a firm order for 20 engines an option for another 40.
- How will you optimize the structure of the design and production assets of the engine-building holding to be created by Oboronprom? Where will its focus lie, in terms of current and future products?
- Once we have established control over all of the enterprises, we will be able to complete a full inventory of the production and technological capacities of the holding. For the time being, we are working on the basis of cooperative relations through our fully-owned subsidiary United Engine-Building Corporation. It is clear that the work currently underway at individual enterprises of the holding will be continued and expanded.
As for production, we are currently analyzing the capacities of the enterprises of the holding and are submitting proposals for the Ministry of Industry and Energy’s Federal Targeted Program for the Development of Engine-Building to 2015.
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