Why did German Swallow beat Russian Falcon?

30.11.2010 — Analysis

Siemens AG and Russian Railways OJSC are opening an engineering center that will design electric trains for Russia. Working in the joint venture, German designers will share part of their technologies with Russians. The Russian authorities expect that with time the country will be able to manufacture the lion's share of components for the Sapsan express train. However, experts think that it will be waste of money without the adequate modernization of the railway infrastructure. As the RusBusinessNews columnist has found it out, Russia came close to creation of its own high-speed railway transport, but failed to bring the project to a constructive outcome due to political and economic reasons.

Siemens AG and Russian Railways signed the memorandum of joint production and maintenance of state-of-the-art electric trains in Russia in July 2010. The Engineering Center will be incorporated in the joint venture. Its objectives include adaptation of design and engineering documentation to Russian conditions for the Lastochka (the Swallow) train developed on the Desiro technical platform.

The first 38 set of trains estimated at 410 million euro will be made at the German facility of Siemens AG. The Lastochka trains will come to Russia before the end of 2013. In September, the companies signed one more contract for delivery of 16 electric trains, some components (about 35%) for which will be manufactured in Russia. The manufacturing of Lastochka trains will be organized by the joint venture that will be established by spring of 2011.

According to the Press-Service of Russian Railways, at the moment the company, together with Siemens AG and potential founders of the joint venture, is considering a possibility of purchasing 1200 rail cars for commuter trains until 2020. The localization is expected to reach 80% by 2017, meaning that trains will be manufactured mainly in Russia.

The fact that Siemens AG is going to share their technologies with Russian manufacturers of traction rolling stock gave the RF Prime Minister Vladimir Putin an idea about possible manufacturing of components for the Sapsan express train, using the same facilities. The chairman of the Government thinks that the task can be accomplished if the manufacturers can find reliable suppliers. However, according to business representatives, it may be very problematic in Russia.

Pyotr Ivanov, Commercial Director of Elektroproekt, says that the Ural Locomotives joint venture that designed the induction-motor electric train based on the Siemens AG technology faces a lot of problems related to its making-up. Partners cannot offer the company a complete package of services that would include centralized deliveries of assemblies and accessories, logistics, consultations and service. Therefore, Ural Locomotives have to split up orders, which sometimes can be economically unfeasible.

The expert states that in Russia only very few companies can boast of the latest process equipment. These, as a rule, are large companies that supply their products not only to the domestic market, but also to foreign countries. At present, they are going through very exacting selection to be qualified as suppliers of components for the Lastochka train жесткий. The production is not innovative; that is why, P. Ivanov has no doubts that both the project will be implemented and the service will be available.

The situation with Sapsans is much more difficult. The Russian medium-size and small business is not ready to adopt new technologies. Most of the manufacturing facilities, including major military plants, need time to train their personnel and to upgrade the equipment. Russia has no machine tools; it lacks most of the advanced materials; it has no even the base to rely on or equipment. Experts say that Russian companies will not be able to do metalwork, if Sweden, Japan, USA, Israel stop tool deliveries.

Upgrading of production (if there is adequate financing), establishing of engineering centers and accumulating of experience can take up to three years. But even availability of intellectual potential does not guarantee successful outcome: billions of rubles will be needed to improve quality of Russian products. In the raw material producing country there is no aluminum and copper foil. According to Pyotr Ivanov, transformers assembled from Russian components are very unreliable tending to break down. Foreign manufacturers are not willing to take the risk, and prefer to rely on the components manufactured in their home country.

Nikolay Manko, Director of the Development Design Bureau of Automatics, confirms that foreign companies are not very enthusiastic in delivering documentation and technology to Russian manufacturers. He thinks that it is not the right time. The Russian railway infrastructure is not ready for high-speed traffic. The Lastochka train will move at the speed of up to 160 kilometers per hour; so it will not damage track facilities. On the other hand, the high-speed Sapsan, which can tear the rails up, needs a special railroad line. Today, Russia cannot afford even to dream about such roads; therefore Sapsans will use the existing railroads, moving at standard speed. Therefore, companies do not see any sense in their manufacturing.

The employees of the Russian Research Institute for Railway Transport, state that foreign companies are interested in localization of production only if there is steady demand for their products and if suppliers comply with world standards. The combination of these two criteria encouraged Volvo to build two tow truck manufacturing factories in Russia. Japan's Hitachi is building excavator manufacturing facilities near Tver. Railway products are more sophisticated and less demanded, so the road to localization will be long and difficult.

Mikhail Burmistrov, General Director of INFOLine-Analitika, is sure that the key issue in achieving actual localization of production is the political will of the executive management of Russian Railways. Purchases of foreign products contribute to retardation and degradation of Russian companies operating in railway engineering. In the meantime, the country had an experience of pilot manufacturing of the Sokol-250 (Falcon) high-speed train that was not put into mass production only because of the position taken by Gennady Fadeev, Minister of Railway Transport of the Russian Federation.

The Sokol-250 train was designed and tested during nine years. It was expected that it would serve as a prototype for a more advance high-speed train. The public saw Sokol in 1999. In the same year it was put into trial trips along the Oktyabrskaya Railroad. It developed the speed up to 237 kilometers per hour on the existing railroad. The express train covered the distance between St. Petersburg and Moscow within 4 hours 40 minutes, keeping the 200 kph speed during most of the time. After five «trips» the tests were assessed as successful, being confirmed by signatures of representatives from the most authoritative agencies, including the Ministry of Railway Transport and the Russian Academy of Sciences.

By the end of 2002, the Sokol train was scheduled for regular trips. However, that year Gennady Fadeev took charge of the railway industry. The attitude to the Sokol electric train changed suddenly. The minister requested control tests that revealed incompliance of some systems, components and accessories with specification requirements. All these faults, according to Mikhail Burmistrov, could have been rectified quite easily. Nevertheless, contrary to expectation, the commission from the Ministry of Railway Transport assessed the pilot model of the high-speed train as unfit for service. In 2003, G. Fadeev announced that the Sokol project was a "historical mistake".

Despite violent objections from executive managers of industrial enterprises and research institutions, which were expressed at the top government level, it was decided to discontinue any further work on designing of home-made high-speed rolling stock. All the work, including trial tests, cost the government 32.5 million US dollars, which can be compared with the cost of one standard train manufactured by the world's major companies. The designers assert that the refinement of Sokol would cost another 3 million dollars.

Experts say that in Russia projects fail only for political and economic reasons. Instead of doing what they are supposed to do, executive managers are more concerned about their appearance before the RF President, their words at a meeting in the Kremlin and desire to gain favor with the superiors. Those who ask embarrassing questions during discussions are not invited to the next meeting. This is politics. And here is economics: tariffs for utilities are rising in Russia, public-sector employees are getting better salaries, the labor market is changing, and productivity is not increasing. Manufacturers say that the average speed of part processing on machine-tools is 2,500 rpm. In the USA the processing speed ranges from 30 to 50 thousand, reaching even 400,000 rpm. Russian machine-tools yield in speed; so why should domestic trains overtake German and Chinese trains?

Vladimir Terletsky