It’s not often Soviet rocket scientists are mentioned in an automotive context, but the subject came up recently on the sidelines of the Russian Automotive Forum in Moscow, where I was interviewing GAZ Group CEO, Vadim Sorokin.
The GAZ chief was discussing supplier quality and the often arduous transition Russian industry has had to make from a vertically integrated command economy where automakers would be responsible for everything: “from mining [metal] to turning out the finished automobile.”
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Never has the issue of the supply chain been so important in Russia – the issue has forced itself centre stage as a collapsing rouble and domestic economic travails force home production to the fore – with obvious financial benefits against resulting pricey imported commodities.
To illustrate his point emphasising the importance of quality for Russian producers, Sorokin quoted Soviet rocket scientist, Sergey Korolev, an extraordinary person whose pivotal role at the heart of the USSR’s space programme, saw Yuri Gagarin become the first person to orbit the earth, much to the Americans’ huge annoyance.
Korolev – viewed by many as the father of Soviet rocket science – was the lead engineer and spacecraft designer who launched Yuri Gagarin into orbit on 12 April 1961 – and in the process managed to hugely tweak the nose of the US.
(Incidentally, it’s widely reported when journalists rang NASA to ask what its reaction was to the Russian success, an irritable answer came back it was early in the morning and the department was asleep. The following day saw the unforgettable headline: ‘Soviets put man in space – spokesman says US asleep.’)
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By GlobalDataSo here’s that quote from Sorokin citing Korolev: “If you do something quickly, but badly, people will find you did it quickly but they will always remember you did it badly.
“If you did it well, but slowly, they will find you did it slowly, but they will remember you did it right.”
Perhaps using some of that methodology as a template during the last major crisis to rock Russia – the country periodically endures seismic upheavals that would make others blanch – GAZ took its top twenty components and identified where they lacked quality.
“We had no time to work with these suppliers and improve them, so we replaced them,” says Sorokin, wryly alluding to the rocket scientist again by remarking: “You can’t swap suppliers overnight – it’s not like going to a supermarket.”
The point ilustrates Russia is a country that can handle big ticket items – despite its undoubted and severe challenges – witness the recent Winter Olympics in Sochi and the forthcoming football World Cup – and at that same conference in Moscow PCMA Rus general manager Jean-Christophe Marchal banged the domestic capability drum.
He issued an appeal for Russian suppliers to come forward and drive down the Franco-Japanese JV’s higher costs as a result of import prices, a plea becoming increasingly vocal, with the French chief even adding to its urgency, stressing the “Russification” of domestic management.
Speaker after speaker at the Russian Automotive Forum eulogised the possibilities offered by a depreciating rouble; this cloud’s silver lining is one offering clear advantages in the overall economic gloom, while that opportunity is being reinforced by concrete measures from the Kremlin, which will see billions of roubles pumped into the sector.
Increasingly strident noises from Moscow – backed by Western analysts in the Russian capital – indicate around US$250m could be injected into the auto business in just the next six months to stimulate demand by up to 200,000 vehicles.
Partly this will see scrappage – a scheme revived in Russia and which saw a – temporary – rise in December sales – used as a blunt instrument to encourage purchases while perhaps even more importantly at a time of high interest rates incentives will be provided to soften the taking out of car loans.
This from Russian Prime Minister, Dmitry Medvedev, who, although seeming to adopt a far quieter public profile than his boss (even though of course bizarrely, he was Vladimir Putin’s chief only recently), seems to have taken a real hands-on approach to the vehicle sector.
“I have signed two resolutions within the anti-recession plan to support automobile and special equipment manufacturers,” he said.
“One resolution concerns co-financing the purchase of natural gas vehicles in cooperation with the regions. A programme launched a year ago has been rather successful.
“We have decided to extend it to this year and to allocate RUB3bn for it. The other resolution will extend the vehicle scrappage programme, which has been successful for two terms, through 2015.
“Subsidies will also be approved for the auto industry to partially subsidies [subsidise] spending on the purchase of new vehicles.”
Medvedev permits himself a modest “rather successful” pat on the back for the natural gas schemes, while he is clearly hoping extending the existing scrappage incentive along with cheaper loans, may well boost the market in the short term.
But not even the Russian Prime Minister can sprinkle his stardust on the auto sector – or any other domestic segment undergoing hardship – indefinitely. There is only so far scrappage and incentives can go before the hard reality of plain economics kicks in and in the end is reliant on the ability and confidence of consumers to buy major purchases such as cars.
Back to Sorokin citing that Soviet rocket scientist – whose truly remarkable life under successive regimes saw him transported to gulags and then rehabilitated as the driver behind Russia’s space programme.
It’s my – admittedly limited – experience of being in Russia that the country is intensely proud of its technological and cultural achievements and they are only too happy to tell you about them – not in a boastful way but in a measured appreciation of what their country can do.
Where once they were perhaps exploited by the old political guard for propaganda purposes, these achievements are now quietly cited with approval, just as taxi drivers in Moscow will proudly point out statues with: “That’s Pushkin” or: “That’s Dostoevsky,” to visitors.
In a similar vein to what some once believed of its rocket programme, rejuvenation of Russia’s domestic automotive sector is a genuine possibility, which may, on the face of it, look currently almost impossible, but this a market that only recently, some were boldly forecasting could reach the heady heights of 4m.
Russians will have to hold their nerve – and The Kremlin will have to open its wallet – straining under a virtual halving of oil prices in the last 12 months – as the – some might argue artificial – stimuli start to take effect.
This year marks the 70th anniversary of the end of the Second World War. While in Moscow I saw a vast poster declaring: ‘Pobeda’ or ‘Victory’ – that must have been 150ft wide – and the capital is gearing itself up for a massive parade that will no doubt beat a fervent, patriotic drum.
The country is undoubtedly being assailed economically in myriad ways – some might argue international sanctions are a direct result of its actions in Crimea and East Ukraine – but it will come through this as so many other crises and look to that 4m potential not in the very near future but possibly long-term.
Addendum: GAZ produced the Pobeda towards the end of WW2, although sales were minimal as hardly anyone could afford it, let alone drive on poor roads. GAZ Group has a fine example of one however, in its home town museum in Nizhny Novgorod, along with a vast collection of Soviet and modern era vehicles, including the legendary Chaika open top limousine so beloved of the Kremlin’s top brass in which to be ferried around.
