Vnesheconombank and Russia’s Industry and Trade Ministry Announce Contest Among Originators of Production-Oriented Blockchain Solutions

On 9 and 10 November 2017, a working group formed by Vnesheconombank, the Ministry of Industry and Trade of the Russian Federation, the Ministry of Labour and Social Protection of the Russian Federation, Rostec and the regional administrations visited Tractor Plants-owned production facilities in Cheboksary, Chuvashi Republic, and Kurgan, Kurgan Region, to discuss the socio-economic situation faced by the problem companies and find a way to handle the crisis.

Since October 2017, several Tractor Plants entities in different Russian regions have carried out turnaround programmes to normalise the situation and help production to recover. The Supervisory Board of Vnesheconombank approved an action plan under the default strategy to deal with the bad debts of Tractor Plants. The action plan supports the production activities of Tractor Plants entities during the transitional period, enables the key entities to continue their operations and aims to settle debts associated with operating costs.

The working group is composed of representatives of the Company’s owner, authorities and Rostec and has extensive experience in managing research and production assets throughout Russia. Its aim is to stabilise the social situation at the manufacturing facilities and preserve their production potential. The urgent issues on the agenda include ensuring timely payments to electric utilities and repaying critical debts to key suppliers and tax authorities.

“The working group prepared a turnaround roadmap for Tractor Plants to reach the key goals under the turnaround programme: ensuring social stability, preventing any production suspension or interruption, forming a solid basis for the future development of the engineering industry. To accomplish the specific objectives specified in the roadmap, the working group engages experts in the relevant areas,” Vnesheconombank’s Deputy Chairman and Member of the Board Pyotr Zolotarev explained.

The Chuvashia-based entities are the most powerful members of Tractor Plants. The 10 companies are responsible for a wide range of activities, such as production, maintenance services and procurement. The total number of employees is about 8,600. The general condition of the Chuvashia-based entities is assessed as difficult due to their considerable debts. However, they are believed to have the high potential for growth. Tractor Plants makes products that will always be in demand in the country’s strategic sectors: mining, infrastructure construction, oil and gas production, transport and agriculture. Its production and research capabilities allow the Company to offer favourable selling prices and increase production.

“Unfortunately, the production facilities are in a very difficult situation. The experts have to start by addressing urgent issues. For example, the beginning of the cold season makes it important to make timely payments to electric utilities. To ensure uninterrupted production, it is necessary to promptly repay critical debts to key suppliers and tax authorities. All these issues are on our agenda. After settling the urgent issues, we will definitely begin to implement the development scenario for these facilities. We understand their strategic importance for national defence capability and the degree of responsibility for fulfilling government defence and armaments supply contracts. Therefore, we decided that we should participate in direct management,” Sergey Abramov, Industrial Director of the Armaments Cluster, commented.

“We are not limited to observing these processes. We are taking an active part because the engineering industry is currently an extremely promising sector for the Russian Federation. Speaking of the future, the Company has good prospects. With new contracts, the current staff will be provided with additional work. Today I would like to express my gratitude for the decisions because wage arrears have been paid. Some people who work part-time, but these business issues will be settled in time. Therefore, we will continue effective cooperation to revive the facilities as soon as possible,” Mikhail Ignatyev, Head of the Chuvashi Republic, said.

Aleksey Kokorin, Governor of the Kurgan Region, said, “We need to coordinate actions and take all possible measures to help one of the Kurgan Region’s leading companies to preserve its production potential, ensuring that the turnaround programme for Kurganmashzavod will not be detrimental to its employees. I think that together we will manage to do this.”

For his part, Albert Bakov, General Director of Tractor Plants, thanked the country’s leadership and Mikhail Ignatyev, Head of the Chuvashi Republic, for personally monitoring the situation. “In addition, I would like to express my gratitude to Rostec for its invaluable help in this difficult situation. I think that all the planned procedures will go smoothly and will be as safe as possible for the employees. We will be able to ensure that production keeps developing. While visiting the facilities today, the Rostec and Vnesheconombank executives have seen that the staff are ready for production achievements and that the facilities have all the necessary technologies and production capacities. What is important for us now is that we have support from the government. I am sure that as Rostec entities, our facilities will certainly achieve guaranteed success,” Albert Bakov said.

Rostec is a Russian state corporation established in 2007 to promote the design, manufacture and export of high-technology non- military and military industrial products. Rostec comprises more than 700 entities that are currently members of 11 holding companies in the defence industry and three holding companies in the non-defence industries, along with over 80 entities under direct management. Rostec’s portfolio includes such well-known brands as AVTOVAZ, KAMAZ, Kalashnikov, Russian Helicopters, VSMPO-AVISMA and URALVAGONZAVOD. Rostec entities are located in 60 Russian regions and supply products to more than 70 countries. Rostec’s consolidated revenue, consolidated net profit and EBITDA reached 1,266 billion, 88 billion and 268 billion roubles respectively in 2016. On average, the Corporation’s monthly pay was 44,000 roubles in 2016. Pursuant to Rostec’s strategy, the principal goal of the Corporation is to secure Russia’s technological advantage in highly competitive global markets. One of Rostec’s key objectives is to introduce a new technological structure into the Russian economy and ensure its digitalisation.

State Corporation “Bank for Development and Foreign Economic Affairs (Vnesheconombank)” is a national development bank and one of Russia’s largest financial institutions. Established in 1924, the Bank has operated under the special Federal Law “On Bank for Development” since 2007. The highest governing body is the Supervisory Board chaired by Russian Prime Minister Dmitry Medvedev. In accordance with the Development Strategy until 2021, Vnesheconombank will focus its activities on financing for high-technology industrial projects, infrastructure development, support for non-resource exports, support for innovations and projects of the National Technological Initiative.

Tractor Plants is one of Russia’s leading integrators of research, industrial, technological and financial resources in the Russian engineering industry. The holding company manages 14 manufacturing businesses located in eight Russian regions. Its production activities are focused on five areas: industrial machinery, railway machinery, agricultural machinery, special-purpose machinery, spare parts and OEM components. The holding company’s entities are leaders in their respective market segments, namely the mining, infrastructure construction, oil and gas, transport and defence industries. Tractor Plants equipment is used in more than 40 countries.

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