OREANDA-NEWS. December 19, 2012. PRESIDENT OF RUSSIA VLADIMIR PUTIN: Mr Chemezov, the Rostekhnologii corporation is now five years old. It was originally founded to consolidate assets, first and foremost in the defence industry.

Much has been done in these years, although we noted many times that we initially expected a faster consolidation in certain areas. I understand that this has to do with the observance of the current legislation, but I nevertheless expect that further work will proceed more rapidly.

CEO OF ROSTEKHNOLOGII STATE CORPORATION SERGEI CHEMEZOV: Indeed, the corporation obtained assets of 633 enterprises. To be honest, we did not expect such widespread problems. After conducting an analysis, it turned out that about 100 of these enterprises were close to bankruptcy, 28 were bankrupt and 23 had completely ceased all operations. When we looked at all this, we decided to divide these enterprises between holding companies based on the type of production, by sector.

As of today, 17 such holding companies have been set. All the enterprises have already been divided up between them and are essentially running. Nevertheless, many problems still remain.

To give you the figures, when we obtained these enterprises in 2008, they indebted approximately 630 billion rubles [USD 20.5 billion] to the state budget and to various loan institutions, while ended 2011 with a surplus – a profit of 45.5 billion rubles. Most of the companies are already functioning normally, steadily. Granted, there are still some problems, but we will try to do as much as possible to maintain these companies, so that they operate normally.

There are some enterprises that we currently no longer need since we retionalize overall production. When they assigned to holding companies, we saw that some of them were duplicating others’ functions, releasing the same types of products, and that we no longer need as high a volume of those products today. So we decided to liquidate some of the enterprises, and to restructure or simply sell some others.

VLADIMIR PUTIN: Winding up, restructuring and selling is probably possible, and in certain cases it is advisable and expedient, but any time this kind of restructuring takes place, you must consider where and how people will be employed.

SERGEI CHEMEZOV: Of course, the social aspect is the first thing we take into account. If we take AvtoVAZ as an example, we received that company during the period of greatest crisis and were obligated to reduce almost 60,000 jobs. When we obtained the company, there were 130,000 employees; now there are 66,000.

But due to a social programme that retrained those individuals and employed them at other companies (we helped them look for jobs together with regional authorities in other parts of Samara Region), we addressed that social issue. We didn’t see any protests.

VLADIMIR PUTIN: And you shouldn’t let it come to that. We are to make joint corresponding decisions with regional and municipal authorities. And the holding company itself must consider how to take the necessary measures in a timely fashion: after all, you know in advance what changes you plan to make, and when.

As for AvtoVAZ, as far as I understand (and your partners have said this), in the near future, you are not planning cutbacks; on the contrary, there is an opportunity to increase the number of jobs, due to an expected increase in production volume.

SERGEI CHEMEZOV: Yes, we have signed an agreement that serves as the basis for our work in line with the development programme approved by the AvtoVAZ board of directors. This programme outlines specific steps aimed at increasing a company’s efficiency, augmenting production output, the production of modern new car models. Naturally, all this will lead to an increase in jobs.

VLADIMIR PUTIN: I hope you will work in the same way in other areas and at other companies.

SERGEI CHEMEZOV: VSMPO-AVISMA is another example. We launched a joint venture with Boeing. That means additional jobs. Moreover, we increased its capacity, which also led to an increase in jobs. This company is located in the Nizhny Tagil area where unemployment now is nearly non-existent, at 0.6 per cent. That rate does not exist anywhere else in the world.