Speculation takes new turn with single entity proposal (627 words)

Published: 4/6/2001

While the government has yet to release the full plan for restructuring of the aerospace industry, Moscow daily, Vedmosti, has reported that it had managed to get a copy of the Ministry of Science and Technology plan under consideration. According to the plan, the ministry is highly sceptical of the prospects for the civilian industry, anticipating that production will remain low over the next ten years, although this appears to be somewhat contradictory to the announcements by the government of leasing support for a number of civilian programmes. It is in the military market that the ministry believes the industry can thrive, estimating exports of between $2-2.5 billion a year over the next decade, with five key enterprises producing 50-60 aircraft each year for export and between 10 and 20 for the Russian Ministry of Defence. Unsurprisingly, the ministry has come to the conclusion that there is too much capacity for demand and has proposed that the first stage of consolidation be the completion of the plans already in force, for creating single integrated entities during 2001 and 2002. The second stage, and probably the more interesting plan, will be to take the most “promising” producers into a holding structure called, Aist. The new super-company will be built out of the all the major state-owned structures, designers and producers including, Tupolev, Aviastar,Ilyushin, MiG, Sukhoi and KnAAPO, with the objective of “concentrating the economic and political resources of the government into a limited number of priority projects” The plan of a single holding on the information available does differ substantially from the previously reported plans of three integrated aerospace companies, which were assumed would have been built around Sukhoi, Tupolev and Ilyushin; a structure supported by statements made by Deputy Prime Minister Ilya Klebanov late last year. For those currently operating outside the government's umbrella in the private sector, at companies such as IAPO and Aviakor, what has been seen of the plan so far must be cause for concern. After all, the possibilities being considered may have the impact of pushing them to the periphery, as aerospace activity coalesces into this new state structure. One representative of the military producers was quoted, by Vedmosti, as being afraid to look at the plan and would wait for the final programme as presented to the Duma. Others have suggested that the proposed organisation is not any different from before, given that the enterprise will remain dependent on funding from a government unable to support large-scale projects. The only real surprise in the leaks so far, is the creation of the super-company and consequently the manner in which it will manifest itself. The companies mentioned, with the exception of IAPO, are largely the current industry. Bringing them together into a super-company makes good sense, but will the operation of the enterprises change. For instance, who would run it? If it is to be Dondukov and the Ministry of Science and Technology, then it could be a recipe for disaster, as it would be for Koptev at the Russian Aerospace agency. The industry needs firm management so that plans become reality, and only Pogosyan of Sukhoi appears to have the clout to achieve the change and manage to retain the necessary skills and the knowledge base that will allow the industry to compete in the military or civilian markets. Pogosyan or who ever may be appointed, will find however, that the nomination for the post may be the first step on a very long road. Having been offered these brief glimpses of the plan, we will have to wait and see what Putin produces, now that the agenda for the discussion has been set with this leak.

Article ID: 2470