Plant design (1921-1926)
In 1921, after the end of the civil war, Glavselmash, organized under the Supreme Council of the National Economy (VSNKh), developed a 10-year plan for restoring the production of agricultural machinery. In 1922, Glavselmash began to implement this plan, selecting 40 of the largest and most promising enterprises on which it focused its attention. And already in 1925 these enterprises reached the pre-revolutionary level of production.
During the years of war and revolution, most of the agricultural equipment fell into disrepair, and the number of peasant farms increased significantly due to the confiscation of landowners' lands, so the Soviet government was forced to again turn to imports. But in 1924, preliminary preparations for the construction of new agricultural machinery plants began in the State Planning Committee, the Supreme Economic Council and locally.
A special commission consisting of engineers A. Ya. Glagolev, N. M. Eshliman and V. I. Voloshin was created under the Glavmetal VSNKh, which studied the feasibility of building an agricultural machinery plant in the North Caucasus, which completed its work on June 23, 1925. Already 1 August 1925 Glavmetal approved the materials of the commission, which stated that the North Caucasus has a great future, because rich in Donbass coal, Taganrog and Sulin metal, Maikop forest, and is also one of the main consumers of agricultural machinery.
From the resolution of the meeting of the Supreme Agricultural Sciences of the USSR dated August 1, 1925: “In view of the fact that the South-East represents a huge market for agricultural implements and in view of the fact that the Krasny Aksai plant existing in Rostov-on-Don meets the needs of the region to an insignificant extent, and also, taking into account the proximity of Rostov to metallurgical and fuel centers, recognize the need for the development of agricultural engineering in the South-East of the country. Recognize that Rostov-on-Don in the future should become one of the main points for the production of agricultural implements, as occupying an advantageous position in terms of sales of products and supply of raw materials, the availability of qualified labor and technical personnel and, in addition, as a major political and industrial center . Design of the plant must begin immediately.”
On October 1, 1925, by order of the Regional Economic Council, the Department for the design and construction of a new plant was organized as part of the Krasny Aksai and Armalit (Armavir) plants. Technical management of the design of the agricultural machinery plant plant was entrusted to engineer Dmitry Dmitrievich Bondarev. The engineering staff of the design organization Novstroyselmash, later Selmashstroy, included: V.Yu. Gan – head of technical department, professor, N.P. Krutikov – head of the technical department, professor, engineers A.I. Fedorov, N.K. Orlov, I.V. Sobolev, M.A. Ivanov, N.N. Dzhunkovsky, P.S. Naumov, N.A. Vasilenko, F.L. Catani, F.F. Denisov, technicians P.T. Tyrkalov and N.N. Chebotarev. In total, over 100 engineers and technicians were involved in the design.
The designers began their work by proving the inexpediency of splitting production into separate territories, because This required additional working capital, which would entail an increase in the cost of production. As a result, the production program of an independent plant was justified.
From the memoirs of Professor N.P. Krutikova: “At that time, the plant project presented a very complex problem. There was no such plant not only in the Soviet Union, but throughout the world. The concepts of “conveyor” and “flow” required extremely convincing argumentation, calculations, and research. I was sent to the USA and visited 63 mechanical engineering plants. This had a decisive influence on further design. The first project was drawn up based on the production of horse-drawn machines, while the reconstruction of agriculture required tractor-drawn machines. The project was revised again. In total, several partial and two radical redesigns were carried out.”
On May 14, 1927, the defense of the plant project took place in Leningrad at the State Institute for Design of Metal Plants. And in 1929, the project was revised again in connection with the establishment of production of combine harvesters.
Construction of the plant (1926-1931)
Simultaneously with the development of the project, a search was underway for a location for the future plant. On March 22, 1926, the Glavmetal and Gipromez commission inspected and approved the site near the Nakhichevan-Donskaya station. On the same day, a meeting of the Rostov-Nakhichevan City Council was held with the participation of representatives of regional organizations, at which it was decided: “To allocate 239 acres of land for the construction of a plant and residential buildings, of which 120 acres are for a plant, and 119 are for housing.”
In the second quarter of 1926, construction work began. At the time when the project was approved, access roads and temporary auxiliary structures were being built. The plant museum contains an old photograph dated April 1926: against the backdrop of the endless steppe, not far from the railway, a wooden house under a tar-paper roof can be seen. Next to it are a roughly hewn table and benches under a tripod for an awning. These were the first “structures” of the future giant. Foreman and survey technicians worked in the house. The first diggers came here to receive tools and work orders. Stone, bricks and logs were also brought here on carts. It was this house that became the beginning of the remarkable history of the giant plant, one of 518 objects of industrialization that began during the period of reconstruction of the national economy.
By April 1, 1927, 4.5 km of railways and 4 km of bridges had been laid, a woodworking and mechanical workshop, a temporary locomotive depot, 2 small construction office buildings, 11 barracks, 7 material warehouses and a stable had been built. Reinforced concrete tanks with a capacity of 30 thousand buckets, a sewage system for the future village, lighting, power, electrical and telephone networks were built. The area was surrounded by a wire fence.
In the second half of 1927, industrial construction began. The foundations of future workshops were laid: woodworking, peasant passages, and timber cutting. The following year, work began on the construction of a forge and press building, a gray cast iron shop, a harvesting machine shop, a mechanical repair shop, a garage and a factory building. In 1929, construction began on a model shop, steel foundry, tool shop, plow shop, seeders, ductile iron, steam dryers, gas generator room and plant administration building.
Construction was planned for 5 years, starting in 1926. But already in July 1929, the first 5 of 18 designed workshops went into operation. On July 21, 1929, the plant issued the first batch of peasant moves under the state acceptance certificate. This day is considered the birthday of the plant.
In May 1928, Nikolai Pavlovich Glebov-Avilov, who played a large role in the construction of the enterprise, was appointed head of Selmashstroy. On June 15, 1930, construction of the first stage of the plant was completed. On this day, director Glebov-Avilov announced this at a rally of construction workers. The meeting sent the Central Committee of the All-Union Communist Party of Bolsheviks a labor report on the completion of construction. A few days later, a response telegram was received about the awarding of the Selmashstroy plant with the Order of the Red Banner of Labor.
At the end of 1930, equipment installation work was completed in the workshops. On January 1, 1931, the plant became operational and received a state production plan for this year for the first time since the start of construction. On April 1, 1931, the acceptance committee accepted, and the head of Selmashstroy N.P. Glebov-Avilov put the Rostov-on-Don agricultural machinery plant into operation. In this document (acceptance certificate) the plant is named “Rostselmash” for the first time.
After the 16th Party Congress, a powerful rise in the collective farm movement began in the country. In terms of the pace of collectivization, the North Caucasus, Middle and Lower Volga were the most prepared for the transition to large-scale collective agriculture. Selmash sent his first products here. For a number of reasons, the implementation of this decision was suspended. In September 1930, it was decided to build a plant for only 10 thousand combines per year, and in connection with this, Kombaynstroy was merged with Selmash. To manage construction, a capital construction department was organized under the Rostselmash Administration, headed by M.S. Matveev. In January 1931, when Selmash was already among the operating enterprises, construction of a combine workshop with an area of 4 hectares began. This was a new turn in the fate of Rostselmash - it was destined to become a leader in combine harvester construction.
The new workshop was being prepared for launch, and in the meantime hard work was going on to create the first Soviet combine harvester. Back in the fall of 1929, its design began by a group of Soviet engineers I.I. Zimin (leader), P.I. Guryanov and A.A. Yakovenko. The first combine harvester, based on the drawings of these designers, was assembled at the Krasny Aksai plant. It was called "Collective Farm". In the summer of 1930 he went out for testing. Several combines from American companies worked next to it, and “Kolkhoz” competed with the “foreigners” not without success.
Pre-war period (1931-1940)
In the summer of 1931, in the experimental workshop of the combine harvester shop under construction, the assembly of two combines of a more advanced design, which were named Stalinets, was completed.” On the fields of the Khutorok state farm in the Krasnodar Territory, our combines were tested together with the American Oliver, Holt and Caterpillar combines. Soviet machines worked better and, unlike combines of all foreign brands, were able to harvest not only bread, but also sunflowers, corn and millet. In January 1932, the assembly shop of combine harvesters at the Rostselmash plant came into operation, and in May the first echelon of Stalinets-1 combines was sent to the fields of the country. Having built Rostselmash, the country not only stopped importing combine harvesters from abroad, but also began to export them.
In 1937, the whole world showed its achievements at the World Industrial Exhibition in Paris, where Rostselmash sent its Stalinets-1 combine harvester. The most difficult thing was to organize its delivery to the exhibition site - the combine was transported on an open platform, near which many people gathered near each station to look at the unprecedented machine. At that time, each Soviet state farm had more such machines than in all of France. Based on the results of the exhibition in Paris, the Stalinets-1 combine was awarded the highest award - the Grand Prix diploma.
Rostselmash combines have gained great popularity throughout the country. Advanced combine operators set world harvesting records with them. For example, in the Chkalov region, 6,012 hectares were harvested during the season (instead of 378 hectares), while 16 tons of fuel were saved. 1,637 people, 373 horses, 25 reapers, 25 threshers, 25 winnowing machines, 40 sorters were replaced on the coupling of two Stalinets-1 combines, and if harvesting manually, this work would have required 3,323 people.
In 1938, an agricultural exhibition opened in Moscow, where Rostselmash received a first degree diploma. On June 14, 1940, the 50,000th Stalinets-1 combine was assembled on the main conveyor.
Great Patriotic War (1941-1945)
During the war, thousands of Rostselmash workers volunteered for the front, their places at the machines were taken by wives, sisters, and children. The enterprise's workshops were quickly reorganized to produce military products. The machines were installed without a foundation, on “logs” that made it possible to dismantle and rearrange the equipment within a few hours.
When German troops were already on the approaches to Rostov, Rostselmash workers produced products for the front and at the same time erected defensive structures and bomb shelters. On October 13, 1941, the Rostselmash team was given the order to begin dismantling the equipment and sending it to Tashkent. Evacuation of the plant became a titanic task. The entire factory area turned into a continuous stream of moving cargo, which was delivered using winches, rollers, and aircraft. More than 3,500 carriages were required to evacuate the plant. On October 19, 1941, the last group of workers, led by director Titarenko M.M., left the plant.
A feat was also accomplished in Tashkent. To locate the plant in Tashkent, sites were provided in different parts of the city. This was not enough and part of the equipment had to be sent to the city of Chirchik, Uzbekistan, 60 km from Tashkent. Thus, 4 branches of Rostselmash were formed in Uzbekistan - 3 in Tashkent and one in Chirchik.
On the 33rd day after the equipment arrived in Tashkent, the plant again began producing products for the front. The installation of machines and conveyors took place in the open air or in hastily adapted sheds and other premises. On the 35th day of continuous operation, the first cast iron was smelted. In 3 months on an empty space of 12 thousand square meters. m, the workshops moved to the rear of the plant grew. Rostselmash supplied the front with mines of 82 mm and 120 mm caliber, warheads for RS (Katyusha) shells, and high-explosive aerial bombs (FABs) of 50 kg, 100 kg and 250 kg.
On February 14, 1943, troops of the Southern Front liberated Rostov. The city lay in ruins. Almost all enterprises were destroyed, including Rostselmash and its village. For eight days before the surrender, the Germans systematically blew up and burned the plant. All the workshops, residential buildings, and the Palace of Culture on the street were turned into piles of ruins. Clubhouse, building of the Institute of Agricultural Engineering, etc. The material damage caused to the plant amounted to over 180 million rubles.
On February 23, on the 10th day of liberation, the first 33 Rostselmash machines began working. At the same time, preparations were launched for the production of military products, and the repair of tanks, tractors, and cars was organized. To restore the plant, it was necessary to clear 150 thousand cubic meters of rubble, lay 21 million bricks, 37 thousand cubic meters of concrete, install 8 thousand tons of metal structures, and lay 185 thousand cubic meters of roofing. In a short time, 145 thousand square meters were put into operation. m of production space.
While the intensive restoration of the plant was underway, Selmash specialists Krasnichenko A.A., V.V. Proshunin and I.I. Popov created the design of the Stalinets-6 combine. And on April 30, 1947, new Stalinets-6 combines were assembled in the harvesting machines workshop. The developers of the new design received the title of Stalin Prize Laureates.
Transition to self-propelled combines (1945-1961)
In the mid-1950s, specialization of industrial enterprises began to emerge in the country's national economy. Since August 1955, according to the decision of the July Plenum of the CPSU Central Committee, Rostselmash began to specialize in the production of grain harvesters. Plows and corn harvesters were discontinued, and the plant is gradually switching to producing only grain harvesters.
At the end of 1955, the plant was asked to begin preparing the production of a new harvesting machine - the RSM-8 combine. Just like “Stalenets-1” and “Stalenets-6”, this combine was developed by designers of the Rostselmash plant. It had a large header grip and a large thresher throughput. The pin drum was replaced with a beater drum. These improvements made it more productive. The RSM-8 combine was produced for just over a year (late 1956 - early 1958) and was produced in quantities of 50 thousand.
In March 1958, the plant received a new important task - within five months it would be converted to the production of SK-3 self-propelled combines. On March 15 at 17.30, the last RSM-8 combine came off the main conveyor, and on July 12, exactly 100 working days later, the Ministry of Agriculture’s receiver accepted the first 27 self-propelled combines manufactured by Rostselmash according to the designs of the designers of the Taganrog GSKB under the leadership of Izakson. On January 24, 1961, the 100,000th SK-3 self-propelled combine was produced.
Modern history (1962-2000)
In February 1962, Rostselmash began production of the next production model - SK-4, which was 25% more productive than the previous one. At the international exhibition in Leipzig in 1963, the car was awarded a 1st degree diploma; in Czechoslovakia (1964), the model won a medal and in the same year in Hungary received the highest award - the Silver Cup. The SK-4 combine was recognized as the most awarded model among grain harvesting machines around the world. In August 1969, the Rostselmash plant produced its millionth combine harvester.
In 1973, the plant switched to the production of an even newer model of combine harvesters of the SK Niva series, presented in several modifications: steep slope, rice harvester, etc., designed for work in various natural areas, as well as for harvesting non-grain agricultural crops. In addition, during this period, tomato harvesters, threshing machines for processing flax, and devices for harvesting cereal crops were manufactured. In the 70s, the Rostselmash plant was completely renovated. As a result of reconstruction, the plant turned into a specialized enterprise, ready to provide the country's agriculture with modern equipment for that time.
By its 50th anniversary in 1979, the plant occupied a stable leading position in its industry. In the early 80s, Rostselmash began to develop and introduce into production highly efficient grain harvesters of the Don family. This was already the seventh transition of the plant to the production of new cars. In February 1984, the 2 millionth combine came off the main conveyor belt of Rostselmash, and already in October 1986 the first Dons were put into mass production.
The next stage in the development of the enterprise was its transformation from a state-owned company to an open joint-stock company (late 1992), the owner of which was the staff of the Rostselmash plant. Changes in the political and economic situation in the country in the mid-90s could not but affect the plant’s activities: downtime became more frequent, and wages were not paid.
In 2000, with the arrival of a strategic investor at the plant - the New Commonwealth holding, which now owns a controlling stake - the enterprise began to operate with renewed vigor. As a result, the number of plant employees increased to 18 thousand people, wage arrears were fully repaid, and the number of harvesters produced increased. For more information about the current activities of Rostselmash OJSC, see the news in the Press Center section.
Yuri Peskov, general director of Rostselmash in 1978–1996, is confident that the best combine harvester in the world is being made today in Rostov. In his opinion, the prospects for modernizing the Russian countryside and creating new jobs directly depend on the fate of the domestic agricultural machinery industry
... “Moreover, in our 700 thousand-strong fleet of Don-1500 combines there were only 30 thousand (less than five percent), and in their fleet there were more than half of machines of the same class. Therefore, in the USA, Canada, and other countries, grain was harvested in 5–7 days, but in our country it still took 25–30. At such a time, it was no longer a harvest, but the remains of unshattered grain. Grain was lost, according to agricultural specialists, up to 30 million tons.”
The share of high-power combines in the domestic fleet is growing, but, as we know, our crops are still harvested for about a month. This means that modernization in rural areas has so far happened...
We have developed a completely new harvester "Don-2600" - a rotary harvester, today it is "Torum". That is, they created the entire line of Don combines and the entire set of mounted implements for harvesting grains, legumes, oilseeds, corn, herbs and rice. In 1987–1988, the plant annually produced up to 30 thousand Don combines of all modifications with all attachments. And even then we came to the conclusion that without the production of a tractor, this is not all agricultural machine building, but only half of it. I really wanted to create something similar to the John Deere, Klaas and Case companies, which also had tractor production. But 1991 came - and the plans collapsed. In order for today's Rostselmash to reach its peak, it needs to master the production of tractors. Thanks to the fact that New Commonwealth acquired the Versitile tractor plant in Canada, we are closer to solving this problem...
RSM supplied the first combines to the American market in 1987–1988. We sold hundreds of combines there. But we did, however, make some concessions for the Americans and introduced the devices that they asked us to do. The current leaders of RSM are doing the same now...
...We made the width of the combine not 1200, but 1500 millimeters. And the drum is 800 in diameter. Why? The productivity of the combine depends on the angle of coverage of the deck. Here is the coverage angle of the deck - 120 degrees. The deck is the concave where 95–98 percent of the grain is threshed. By changing only one parameter, we solved the problem of the combine's productivity purely arithmetically by two times, but in reality - by five. “Niva” threshed five kilograms per second, “Akros” - 10 kilograms, and “Torum” now produces 25 kilograms.
But you didn’t develop new parts from scratch, did you still take foreign analogues as a basis?
We took everything as a basis. About 500 types of components in the Soviet Union did not even know what to call them. I persuaded the management to buy five foreign combines for Rostselmash. They were bought and brought to Solnechnogorsk to a testing station. Among them was John Deere 8820. We took it apart down to the last detail. And we realized that we couldn’t do it like they did. We do not have the equipment to produce parts of this design. And we developed our own designs. They tested them, and the first combine was loaded onto a ship and sent to America, to the state of Nebraska - there is a test bench for agricultural machinery there. And we beat the John Deere combine on this test bench. They all fainted. So at that time the best combine harvester in the world was the Don-1500, now called Torum.
Is this an official assessment?
There is a document signed in Nebraska. Since then, by the way, it has been impossible to persuade foreigners to conduct comparative tests. But, for example, Mr. Governor of the Krasnodar Territory concluded an agreement on the construction of the Klaas plant. It's worse than John Deere, not to mention Torum. But the governor puts pressure on his chairmen: if you take a combine harvester, I’ll give you some kind of discount, if you don’t take it, I won’t give it...
When did the crisis begin at Rostselmash?
We received 55 percent of our components from Ukraine, and from August 21, 1991 to January 1, 1992, these supplies stopped completely. And from there they supplied us with final drives for axles, engines, a hydrostatic drive for axles, rubber products, belts, bearings, and so on... Rostselmash stopped. Over the course of six months, we organized all this production at our Russian factories. In three months we organized the production of engines at the Yaroslavl plant. The Kremenchug plant in Ukraine, which made KrAZ trucks, stopped; they did not take engines from Yaroslavl - and we became the main consumer of Yaroslavl engines.
But one man ruined the plant’s economy, his last name was Chernomyrdin. In 1993–1994, I had 37 thousand combines in my unfinished inventory. There were both “Nivas” and “Dons”. A very decent harvest ripened that year. And Chernomyrdin came to the plant and said: “Yuri, I ask you, give me these combines, I have nothing to harvest the grain with, and I will pay you before the New Year.” I believed him and gave it to him. He is also the Chairman of the Council of Ministers. And I worked directly with Kosygin, I had cases when Alexey Nikolaevich called at two or three o’clock in the morning and said: “Yuri, I’m sitting here with Kunaev from Kazakhstan, his cleaning starts in a week, and he needs to go there.” 1200 combines, how to solve this issue? I stopped all loading, turned around all the combines and shipped the required quantity to Kazakhstan - the situation there has always been the most difficult.
Is that why you shipped Chernomyrdin too?
Certainly. He gave me the money at the end of 1994 - a year later. And then inflation was 200 percent or more. And instead of receiving money for 37 thousand combines and restoring working capital, we received only losses. If he had not treated me this way, the plant would not be in such a difficult situation.
In 1996 I left. And he disappeared for three years. I lived in a dacha and never came to Rostov once. Three years passed, three directors of Selmashevsky factories came to me - we sat for a long time and discussed what to do with the enterprise, because Chub decided to bankrupt the plant after all. I do not rule out that someone really wanted to use the plant site for housing construction.
This is not in your book.
I came to Chub and said: “Vladimir Fedorovich, do you understand that Russia will be left without bread? Because, no matter what they say, just as Rostselmash used to harvest 70 percent of the grain with its combines, so it still harvests 70 percent. And only 30 percent are imported.” And he answered me: “I can’t do anything more - I received official instructions from Moscow to bankrupt the plant.” I say: “Then I’m forced to get involved, Rostselmash cannot go bankrupt.” He told me: “Don’t do anything stupid, you won’t succeed.” I went out and called Boris Nikolaevich - I had a phone that he took. I told him everything, he said to me: “Yuri, tell me how much time you need to resolve this issue.” I tell him: “A year and a half.” - “Okay, Yuri, I’ll now give the command to Chub so that he doesn’t touch you for a year and a half.” And he gave the command to Chub. They left us alone. And six months later we found the “New Commonwealth”, which is led by three people: Konstantin Babkin, Dmitry Udras and Yuri Ryazanov. It is their merit that RSM still produces combine harvesters today. When they arrived, I asked them only two questions. First: what are you going to release at Rostselmash? They said: “We will continue to produce grain harvesting equipment.” I say, “I’m fine with that.” And the second question: “What will you do with salary debts?” They say: “We will pay off those who work before the New Year (this was in August). And with those who left - until the first of July next year.” They accomplished both. After this, the critical question of whether Rostselmash would exist was removed...
Maxim Kalashnikov: as you can see, Babkin and his comrades were able to return to what the USSR did in the field of the “combine breakthrough” of 1987-1988. But they are not allowed to move further: the entire system of lending to the Russian economy, the idiotic tax system of the Russian Federation and the lack of a state support system comparable to the Western system for agromash are ruining the best harvester in the world!
At the beginning of June, the management of the Rostselmash (RSM) plant announced a forced suspension of production. The main reason was the problem of selling agricultural machinery. The total number of unsold products amounted to 1.8 thousand units. Rostselmash clearly did not expect such a development of events. The enterprise, having announced the prospects of large-scale reductions, rushed for support from the authorities - the regional and federal governments. This is a familiar scenario, the implementation of which may hide the main plot. Accession to the WTO, which RSM feared for so long, actually happened - and now we will need to work differently. Even if the government helps.
In the future scenario of the fate of RSM, two points are visible today. Firstly, we need to develop at the expense of foreign markets. What needs to be done for this is a separate conversation. The second point: the enterprise’s share in the domestic market will most likely decrease - here we only need to fight not to do it too much. This is precisely why the ongoing negotiations with the Russian government are needed.
Damaged combine builder
Last year was very good for RSM - unlike the year before. In 2010, the revenue of the group’s main structure, KZ Rostselmash LLC, fell by a third, to 10 billion rubles. But the next year, the agricultural machinery market itself in Russia grew from 3,856 to 5,426 units - and the share of Don combine harvesters amounted to 50 to 60% in different segments. According to the government of the Rostov region, in Rostselmash Combine Plant LLC in 2011, compared to 2010, the production of grain harvesters increased by 1.5 times, tractors for agriculture and forestry - by 1.7 times. The company's turnover in the 2010–2011 agricultural year increased 1.9 times.
The company’s annual report for 2011 states: “the market for grain harvesters in Russia in the 2011–2012 agricultural year will amount to 4000–4500 combines, which is 26–27% lower than the previous year.” It also says that this year the plant planned to produce about 2.5 thousand combines and thus occupy about 60% of the domestic market. It must be said that this is half the pre-crisis level - in 2007, more than 5.1 thousand cars were assembled and sold. But this year RSM was going to add another 30%. But sales suddenly went to a peak.
“In May of this year, we sold 20 times fewer combines than in May last year,” says KonstantinBabkin, managing partner of the industrial holding “New Commonwealth”, which owns “Rostselmash”. “I couldn’t predict such a fall.” Now production has started, but the situation has not fundamentally improved. Demand for agricultural machinery is reduced, investment in agriculture is weak. In addition, low yields are expected this year, so the outlook is not very bright.”
Earlier, during a discussion in the State Duma of the ratification of the protocol on Russia’s accession to the WTO, Konstantin Babkin said that if the authorities do not take measures to support the domestic agricultural machinery industry, then Rostselmash alone will be forced to lay off about 2 thousand people. Reductions at the enterprise are already underway - according to official information, they are insignificant, according to unofficial information, they are already significant. Representatives of the plant significantly emphasize that the dismissal of personnel will have a negative impact on the entire production system. “In fact, if it comes to layoffs, we will lose highly qualified personnel who will be in demand on the market,” explains the director of the marketing department of RSM ZaurDyshekov. “If we lose our personnel, we will definitely not get them back, even if the situation stabilizes.”
First WTO effect
Representatives of RSM persistently emphasize that the plant is experiencing difficulties with sales not because its products at some point stopped being bought - the problem is of an industry-wide nature. The situation is confirmed by an expert from the BCS Express company. BogdanZykov: “In the first quarter of 2012, the situation began to change, not for the better. Although production increased—specifically, 9 percent more tractors were produced than in the first quarter of 2011—product shipments fell 4.5 percent during the quarter. The situation with grain harvesters is even more difficult: Russia produced 1.5 times more of these machines, but shipments decreased by 36 percent. An unexpected and unpleasant symptom for manufacturers was that demand fell even for those cars that sold well during the same period in previous years.”
One of the main reasons for the change in demand in the agricultural machinery market, of course, was Russia’s accession to the WTO, or more precisely, the expectations of farmers that duties on used foreign agricultural machinery would be reduced from 15 to 5%. Bogdan Zykov adds that the Russian Federation’s obligations to the WTO provide for a reduction in the level of state support for agriculture from $9.9 billion to 4.4 billion by 2018 and limit export support. “This period will be the most difficult for agricultural machinery factories,” notes Mr. Zykov.
It should be noted that it is especially difficult for domestic factories. The trend towards a reduction in the share of domestic mechanical engineering has already become apparent. “The first quarter of 2012 proved to be very successful and gives hope that this year will end with a new record for doing business in Russia,” says the general director of Kuban LLC “CLAAS” RalphBendish. - Russian mechanical engineering was unable to take advantage of the temporary advantage to raise the technological level and reliability of equipment, build an appropriate pricing policy and defend its position in the domestic market. Agricultural producers require the most high-tech equipment from mechanical engineering, which in all respects meets international standards. They find such equipment primarily from those Western companies that have their production in Russia.”
Dialogue with the state
Being the largest player in the domestic agricultural machinery industry, Rostselmash has always been an active party in the dialogue with the authorities - both regional and federal. Konstantin Babkin’s activities in defending the interests of domestic mechanical engineering have actually turned into political ones. The main idea that Mr. Babkin is trying to convey to the government is the inequality of positions in which foreign and domestic players in the agricultural machinery market find themselves. This inequality arises because foreign companies, in the fight for clients, often rely on the shoulder provided by their states.
The first significant result was achieved three and a half years ago - in the wake of the crisis. In December 2008, having laid off 1.3 thousand workers, New Commonwealth raised the issue of the need for state support for the industry as a whole and for the Rostov plant in particular. Then the Prime Minister visited the Rostov site VladimirPutin, and already in January 2009, a 9-month import duty was introduced on certain types of combines in the amount of 15% of the customs value, but not less than 120 euros per 1 kW of installed engine power, which allowed Rostselmash to significantly increase sales. However, the temporary rather than systemic nature of the support showed that the government was more concerned not with the economics of the enterprise, but with its social function.
Now the situation is largely similar. The plant attracted attention only when it announced the prospect of mass layoffs. Objectively, for a country with a relatively low average unemployment rate of 5%, this is not very scary news. But for the region, where a month ago it was announced that about 2.5 thousand people would be laid off at the Taganrog Automobile Plant, this news is much more unpleasant.
In mid-May, Konstantin Babkin, as president of the Rosagromash association, addressed a letter to the acting director. O. first deputy prime minister VictorZubkov, in which he outlined the difficulties in the industry and asked to intervene in the situation. In particular, Mr. Babkin proposed 12 measures that, in his opinion, could improve the situation in the domestic agricultural machinery industry. Thus, financial support is needed in the form of additional financing, subsidies and preferential leasing to the CIS countries in a total amount of 15 billion rubles and maintaining customs duty rates on combine harvesters at 15%.
Soon after this, the assembly of combines at RSM was stopped for a month, and a few days after the restart of production at the plant, the Deputy Prime Minister came to visit ArkadyDvorkovich, who promised that the new state program for the support and development of agriculture, which should be adopted before July 15, will provide support for the demand for domestic agricultural machinery. “I think that we will find a mechanism to support both agriculture and agricultural engineering, which will allow us to increase the production of equipment, and not reduce it, as is happening now,” Mr. Dvorkovich said in Rostov-on-Don. - There are funds for this in the budget. The main thing today is to decide quickly, literally within one or two months, on a support mechanism. And the government will adopt a corresponding resolution.”
The governor of the Rostov region also said that it is necessary to help Rostselmash BasilGolubev, promising that this industry will not be left without the attention of the regional government. However, after this meeting, Konstantin Babkin himself wrote in his blog on LiveJournal about the planned support measures: “There is a feeling that these measures will not come into force soon, or will be distorted, or will not be implemented at all.” These doubts are, in general, not unfounded.
“Our government and the ruling elite did not fight for the WTO in order to now, contrary to the interests of world capital, follow the lead of Russian capital,” says Associate Professor of the Department of Economic and Social Geography, Faculty of Geography, Moscow State University VladimirGorlov. - Russian business is to blame for not being able to adapt to global rules in 20 years. 15 billion rubles needed for agricultural machinery production are meager funds on a national scale. But the time for support is now worse than bad. We need to raise money for the second wave of the crisis. Therefore, it is unlikely that the government will get involved in another serious company for state financing - it really wants to get into the WTO. In addition, the elections have already passed, and the time convenient for assistance has been missed. At best there will be ostentatious gestures and promises. In Russia, the restoration of the entire Soviet mechanical engineering is not and cannot be a priority task, and no one undertakes to rank it by degree of importance and level of support. So far everything is going according to the principle “if he survives, he will survive.”
Spot help
Within the framework of indirect government assistance, leasing and credit schemes can be distinguished. According to the company, last year about 70–75% of Rostselmash’s sales were carried out through credit lines, and about 10% of equipment went through Rosagroleasing channels. This year, Rosagroleasing's share will account for about 25% of Rostselmash's sales volume. This redistribution in the company's sales structure is due, in particular, to the fact that in 2012 the Rosagroleasing program was being implemented to update the machine and tractor fleet of farms, the goal of which is to accelerate the pace of modernization of the domestic agro-industrial complex. “The program is designed for all domestic agricultural machinery enterprises, and Rostselmash is one of its main participants,” says the head of the department for interaction with the media and public organizations of Rosagroleasing OJSC. SergeySelivanov. - Supply contracts are concluded on the basis of applications from agricultural producers - this is the main determining criterion. As for the volume of Rostselmash in the program, as of June 26, 2012, contracts worth over 2.5 billion rubles were concluded for the supply of 575 units of equipment produced by Rostselmash within the framework of the renewal program. If a total of 9.5 billion rubles are allocated in 2012, then today over 26 percent of the total volume of the program falls on the share of Rostselmash.”
At the end of June, a large delegation of heads of federal ministries and State Duma deputies was expected at Rostselmash, but in the end only Deputy Prime Minister with advisory functions Arkady Dvorkovich (third from left) made it to Rostov.
Konstantin Babkin is quite skeptical about Rosagroleasing’s contribution to saving the plant - in his opinion, this is not fundamental help. In addition, the plant doesn’t know for sure whether Rosagroleasing will buy equipment from them or not, and if it does, how much. Mr. Babkin has another complaint against the state-owned company: “Rosagroleasing is actively promoting foreign products, in particular Belarusian ones. They take taxes from us, invest them in “Rosagroleasing” and with this money they buy combine harvesters abroad and sell them to us. They take our money and don’t buy our equipment. It's not entirely fair."
Meanwhile, the government of Belarus announced its readiness to buy RSM in order to create a unified production based on the Belarusian Gomselmash. This was stated by the Prime Minister of Belarus MichaelMyasnikovich in his report to the President AlexandruLukashenko: “I think we can consider the profitability of this deal. Today we have a large domestic market in three countries for forage and grain harvesters. We believe that a single company can operate in this market.” Representatives of the Gomselmash plant declined to comment. In a conversation with Expert YUG, Konstantin Babkin confirmed that the Belarusian side approached him with a proposal for negotiations, but, according to him, the New Commonwealth is not seriously considering the possibility of such a deal.
And Rostselmash was preparing
It cannot be said that RSM was not preparing for accession to the WTO. In recent years, the company has been actively strengthening its position in the global market. In the fall of 2007, the company completed the purchase of shares in the Canadian tractor plant Buhler Industries Inc., in 2009 it acquired the assets of the American companies Red Ball and Feterl Manufacturing Corp, and in 2011 it acquired the assets of the Canadian equipment manufacturer Ezee-On. As Mr. Babkin says, today 40% of New Commonwealth’s production is located in North America: “This allows us to avoid serious shocks for the company that are associated with accession to the WTO and a blow to production here in Russia. These are the main measures that we are taking in connection with our accession to the WTO.”
In addition to purchasing shares of foreign companies, Rostselmash began to actively develop new foreign markets. In addition to established and proven schemes for selling agricultural machinery to the Baltic countries, Bulgaria, Moldova, Kazakhstan and Ukraine, the company now sells equipment to Poland, Hungary, and Turkey. “We understand that we need to diversify our risks and not depend on the main markets. Now, out of 400 thousand units of equipment, 10–15 percent will be exported,” explains Zaur Dyshekov.
At the same time, the plant actively expanded its range. In conditions of low consumer assessment of the quality of Don combines, this was necessary. In 2008, the ACROS combine harvester was put into mass production, replacing the Don-1500; today the fourth modification of this machine has been developed. A year later, the seventh generation TORUM rotary combine appeared: this model was supposed to compete with powerful combines of transnational players and enter foreign markets, including North American. At the beginning of this year, it was announced that a new paint and varnish shop would be organized in Rostov. Konstantin Babkin told Expert YUG that this workshop should also help exports in many ways - the previous quality of paint on combines did not allow them to be transported overseas, but now this is becoming a reality. However, now Mr. Babkin is so restrained in his assessment of export prospects that it is time to suspect some exaggeration.
“We actively carried out modernization at the Rostov site, but this was not related to joining the WTO,” explains Konstantin Babkin. - We did this, on the contrary, with the expectation that the government would come to its senses and would not impose unfair obligations on us. With Russia's accession to the WTO, nothing opens up for us. We will not sell any additional harvesters. Not a single legislative act or regulation becomes more favorable for us.” If the company were 100% sure that Russia was joining the WTO, then a completely different development strategy would be adopted - in particular, it would involve stopping investments in the domestic site, says Mr. Babkin.
World player or...
“The sustainability of RSM in the WTO conditions will be ensured only if it can grow from a manufacturing concern into a technology company,” says the head of the project department of the North-West Center for Strategic Research. DmitriySanatov. - To do this, he must become involved in the processes that are currently taking place in global mechanical engineering: this is both the composite revolution and the revolution in the implementation of new production technologies and robotics. If Russian enterprises do not invest in new technologies, then we are unlikely to be able to claim a serious position in the world market.”
“Many Russian manufacturers are accustomed to the fact that they are virtually monopolists in the market, to the fact that Russian consumers are accustomed to their technology and that, when necessary, they can demand financial support from the state,” says Ralph Bendisch. - I think that we need to concentrate on solving our problems independently - on improving technology, building a certain pricing policy, and not on inventing all sorts of obstacles for other players to enter the Russian market. We are observing a whole series of actions by Rostselmash aimed at its establishment as a global player. This is a valid strategy as long as it does not take too much away from the company's resources. “Rostselmash is a Russian company - it should value its share in the domestic market.”
“Of course, we would like to become a global player and conquer half the world,” agrees Konstantin Babkin. - But this requires government support, export programs, reasonable economic and industrial policies. If we are driven only to the domestic market and are pressed by unfair competition, we will be a small local player for some time. Production itself will gradually move abroad, although we will continue to work on the Russian market. But there are no prerequisites for us today to become a powerful, global company, one of the world leaders.”
Dmitry Sanatov responds to this that Rostselmash, with its more than ten percent share in the world market, is already an international company. And if the plant can deploy efficient production clusters that save costs and launch technological modernization programs, then it will be able to strengthen its position. But at the same time, its share in the Russian market is questionable. Experts agree that the most pessimistic forecasts that by 2018 the share of imports on the Russian agricultural machinery market will reach 97% are unlikely to come true, but taking into account existing trends in the coming years, imports may still grow from 48 to 60–75% .
RSM was one of the first among Russian enterprises to find itself in a historically new situation, when in its native market the ground was on fire under its feet, and in a foreign market no one was waiting. By and large, the plant will emerge from this situation either as a full-fledged global player or as a medium-sized Russian enterprise.
Konstantin Babkin, Chairman of the Board of Directors of the Rosagromash Association, which includes the Rostselmash Combine Harvester Plant, published on his Livejournal page an answer to Vladimir Putin to his question - why Rostselmash does not transfer the production of tractors from Canada to Russia.
The businessman gave a complete breakdown, which was clearly not in favor of Russia.
1. The average salary of a highly skilled worker (welder or assembler) in Rostov-on-Don is 67-69% of the salary of a Canadian worker in Winnipeg. But at the same time, in Canada, payments to the pension fund are 3.5 times lower and social security fees are 2 times lower. In fact, for 1 ruble of salary in Russia you need to pay taxes of 81 kopecks, and in Canada only 72 kopecks. In addition, in Canada the value added tax is 12% (versus 18% in Russia).
2. Electricity tariffs in Canada for industrial enterprises are about 1.7 rubles per kW ($0.055). In Russia - 2.2 times higher - 3.7 rubles. That is, the tractor plant’s electricity costs when moving it to Russia will increase by $2.1 million.
3. The increase in costs for cargo transportation of similar production in Russia will amount to $4.2 million, and taking into account the costs of paying for the services of natural monopolies, it will amount to $5.6 million per year.
4. A key factor in business development is the cost of loans. In Canada, interest rates on loans are 5.1 times lower. For the Canadian and Russian tractor plants, the difference is $14.4 million (3.5 million versus 17.9 million).
5. The biggest item is taxes. The plant, located in Winnipeg, pays $26.1 million less in taxes than its counterpart in Rostov.
6. Even the cost of security at the plant in the Rostov region will be about $1.05 million per year, which is $0.898 million higher than now at the Canadian enterprise. To guard the plant in Winnipeg, 4 people are used, and to guard the Russian plant you will need 150.
In addition, Babkin gave examples of powerful government support for manufacturers in Canada, in particular various programs to compensate for the costs of energy saving, the development of innovations, investments in personnel training, and much more.
Among the Russian advantages, the businessman singles out only lower wages for workers and the cost of gas, the difference in which is no longer so obvious.
Hence the pace of production development - in 2013, the growth in sales of tractors in Canada was 8%, of combines - 21%. At the same time, in Russia there was a decrease of 13% and 26%, respectively.
The disappointing conclusion of Konstantin Babkin is that transferring the production of his tractors from Canada to Russia is not economically profitable, as it leads either to unprofitable activities or to a significant increase in the price of the product.
This week, the Federal Agency for Federal Property Management (Rosimushchestvo) submitted amendments to the privatization plan for 2005 to the Ministry of Economic Development. As Kommersant was informed by the Federal Property Management Agency, the list of state-owned shares, the privatization of which has been postponed to 2005, included the state-owned 20.27% of shares in OJSC Rostselmash. However, at the enterprise itself, the state-owned share in the share capital of Rostselmash, taking into account the additional issue, is estimated more modestly - at 8%. Despite this, the largest shareholder of the combine production plant - PS "New Commonwealth" - announced its intention to buy out the state stake.
Rostselmash is the largest manufacturer of agricultural equipment in the CIS with a turnover of more than 6 billion rubles per year. Since its founding (July 21, 1929), the company has supplied more than 2.5 million units of equipment to its customers in 48 countries. Today the company controls 53% of the market (in monetary terms) of grain harvesting equipment in Russia, Ukraine and Kazakhstan.
The state stake of 20.27% of the shares of OJSC Rostselmash has been listed in the privatization plan for quite a long time - since 2002, but for unknown reasons the state constantly postpones the sale of its share in the Rostov combine-harvester plant. During this time, significant changes occurred both with the composition of the enterprise’s shareholders and with the size of the state stake.
The New Commonwealth Industrial Union, which became a strategic investor in Rostselmash in 2000, was able to increase its stake to 85% in four years: in 2000, a blocking stake was acquired from the former managers of the plant. Then, due to the massive purchase of securities from employees, the share of the New Commonwealth exceeded 60%, and after an additional issue of shares in the amount of 150% of the authorized capital in 2004, the industrial union began to control about 85% of the authorized capital of the OJSC.
The state's share decreased as a result of the additional issue. According to experts from the New Commonwealth, it is currently about 8%. However, the leadership of the union is still interested in purchasing the state stake. “If another organization acquires these shares, we will have to deal with a new partner. I wish his intentions were clear. When this is not the case, the natural desire is to acquire the state stake ourselves, which is what the New Commonwealth intends to do,” the company explained to Kommersant.
The New Commonwealth refrained from answering the question of how much the acquisition of the state share in Rostselmash might cost, but noted that it is unlikely to be a significant amount. “These shares were worth a lot of money when it was possible to collect a blocking stake. Now there is no such prospect, and all the profit of the enterprise is invested in modernizing the plant, so it is unlikely that anyone will be interested in the state stake,” the industrial union believes.
Meanwhile, when 1,922,156 shares of an additional issue were placed in 2004, the cost of one share was 536 rubles. Analysts called this price too high and believed that New Commonwealth, having announced its intention to buy the entire additional issue on its own, did not intend to share it with anyone, and therefore set such a price.
The Federal Property Management Agency refused to disclose details of the upcoming sale of the state stake in Rostselmash. It is only known that after the agency has sent its proposals to the Ministry of Economic Development and Trade, the ministry must submit them to the government by March 1. The Federal Property Management Agency believes that only after the government decision will the prospects for the future privatization deal become known.
ALEXEY PAVLOVSKY
