Rybinsk Motors in bid to secure transfer of documentation and orders (806 words)

Published: 7/4/2001

The recent step down by Yury Reshetnikov, joint General Director of Perm Motors and Aviadvigatel, from his responsibilities at the Aviadvigatel design bureau may have been motivated by more than a simple need to focus on one of the businesses to address “technical issues” ahead of the merger of the two entities. According to reports, a contributing factor has been Reshetnikov's lack of response to the request by Yury Lastochkin, General Director of Rybinsk Motors (RM), for the design documentation of the PS-90GP1 and PS-90GP2, in order to commence production of gas turbine units (GTUs) for Gazprom. This has been made on the grounds that RM, as one of the originally designated producers of the engine under the decision of the Ministry of Aviation in 1993, has a right to produce the engine. It also reports that it has a full set of documentation for the PS-90A1, transferred to it from Aviadvigatel before it was privatised. The request for the documentation, however, has met with no answer by Reshetnikov and RM therefore recruited the Ministry of State Property to press its case, alleging that Perm could not meet the demand for GTUs from Gazprom and it, therefore, should participate in production of the GTUs. Nikolai Gusev, the representative of the ministry on the board of Aviadvigatel, tabled an item on the issue on the agenda of the recent Aviadvigatel board meeting, but removed it at the last moment. In theory, the transfer could have been approved, if the state and Gazprom had voted together, as they have a majority over Interros and Pratt &Whitney, the other key shareholders. However, Dmitry Kravchenko from Interros believes that RM would also require the approval of the Russian Aerospace Agency (RAKA), in order to start production. Sources suggest that, with or without Aviadvigatel's permission, RM plans to go ahead with production of GTUs and insists that the move would be legal. For Reshetnikov, handing over the documentation to the RM makes no sense. At a recent press conference he made it clear he believes that PM is in a position to fulfil the orders and refutes the ministry's case that it needs two producers. While not naming names, Reshetnikov did confirm he had been under pressure from "certain ministries" to allow the transfer of documentation and orders to RM. He obviously resisted doing so and this may have contributed to his change of status. Reshetnikov, after his “voluntary" decision remains unrepentant and continues to believe that RM does not currently have the capability to produce the GTUs and would take three to five years to prepare for the serial production. RM contends that it needs only a year. According to several directors of PM holdings, in a letter to the government, the transfer of part of production would also hurt Perm since, if the partial transfer to RM is made, their companies would sustain losses, with commensurate jobs cuts. Victor Kobelev of PM added that, although he thinks the RM line could get some customer interest, the lion's share of the business from Gazprom would not be placed with the plant. This somewhat contradicts the comments by Reshetnikov, who felt that Gazprom would exploit the situation to its own ends in terms of payment. It is also not consistent with the agreement announced in May between Gazprom and Lyulka-Saturn, soon to merge with RM, for the delivery of smaller GTUs based on the Al-31F. Reports from elsewhere have suggested that the Ministry of State Property planned to meet and decide the allocation of the Gazprom orders, but was stopped by the intervention of senior government figures. The involvement of the ministry in the restructuring of the Perm engine building activity has been an issue for some time, owing to its desire not to dilute its holding in a merger with an entity in which it has no stake. This has been judged to be one of the major obstacles to the creation of the yet to be achieved Perm Centre of Engine Building and, in the view of some, could be threatened by the transfer of technology to another producer of what is probably Russia's only viable major engine and a product that is likely to be in heavy demand, if the proposed leasing structures provided financing for Russian aircraft. Given the protracted discussions over the creation of the new entity, the disagreements also suggest that the ministry may not be entirely reconciled with the restructuring plans on the table, proposed by Interros. The situation also suggests that, yet again, turf wars can influence important decision making within the industry, even when they run in the face of established policy and the protagonists and supporters are often entities within the government itself.

Article ID: 2619