Kurganmashzavod in the grippy hands of Sergey Chemezov

Why Rostec headed by Sergey Chemezov is grabbing a bankrupt plant and how the state corporation will negotiate with Tractor Plants owned by Mikhail Bolotin and Albert Bakov.   
Origin source
Novikombank, controlled by Rostec, intends to bankrupt Kurganmashzavod. It is known that the defense enterprise was soon to be transferred under the state corporation management. However, there were allegations that the decision was temporary, and soon the shares would be given back to private owners. In addition, the plant owners have come up with a gentle tranfer scheme and asked for a loan. But it seems that the state corporation will simply take the asset for itself, end of the story.

Our armor is strong, but debts are many

Last autumn Novikombank was trying to recover from 613 million rubles from Kurganmashzavod. And now it filed for bankruptcy. This is a normal situation, when the lender goes to court. Such cases do not necessarily result in bankrupcy; often, if the amount of debt is not critical, the parties make some kind of an agreement. Hundreds of millions for a large enterprise, which produces infantry fighting vehicles for the Ministry of Defense, is a rather small amount. But here the situation is different. Novikombank is under the control of Rostec. And the corporation has long cherished plans to get the plant under his wing. Negotiations were conducted 10 years ago, but the zaro hour came just now.

Kurganmashzavod has been experiencing problems for many years. At one time the company stock ended up in the hands of its main creditor, VEB. But last year, according to the agreement with the bank, the plant owners returned their asset. And it seemed that KMZ would be able to get out of the swamp, but life has dictated its own terms. Kurganmashzavod is still part of the private Cheboksary Tractor Plants, which includes many more companies, among them civil ones, producing agricultural machinery. The owners of this group are businessmen Mikhail Bolotin and Albert Bakov (the latter, incidentally, is the son of film maker Nikita Mikhalkov). Shares of Kurganmashzavod were transferred to Tractor Plants in 2005. A few years later KMZ gradually began to sink into debt.

Defense plants of the entire country, unite!

In fact, a defense enterprise is hard to be reduced to losses. It must be stable to earn on a state defense order. However, there are several options when this source of income does not help. State Defense Order regularly fails for different reasons. Military may become dissatisfied with something. Or just there's no time to transfer the money. KMZ has been accused of disrupting the supplies, too. The most notorious example is the production of an airborne combat vehicle. But who was to blame for that situation is difficult to understand. After all, in all honesty, the plant can make mistakes. Or maybe it was the Ministry of Defense: both parties have a lot of opportunities for that. 

Another cause of the problems may be related to the fact that Kurganmashzavod is a group of companies. And, accordingly, the profit is distributed to the entire group. And then, there's the principle of collective responsibility. Losses are divided and liabilities either. As for the losses, they have reached an incredible level: almost 80 billion rubles. So it is not surprising that the state had to intervene. First, though, the company wanted to take care of Uralvagonzavod. But then it was not up to it. It has already taken care of Uralvagonzavod, which is headed by Oleg Siyenko, to such extend, that it nearly bankrupted. As a result, the company will be taken by Rostec. And management of the state corporation had a bright idea: why not to combine Uralvagonzavod and Kurganmashzavod into a single tank-making holding?

Said and almost done

And this is where the fun began. It is one thing to transfer Uralvagonzavod to the state corporation: the plant itself is a state corporation and is 100% owned by the government. De jure it is only a formality. It's quite another thing to do just as well with a private enterprise. When it became clear that Kurganmashzavod is in need to be saved, its owners asked the government to take the asset (perhaps this is indirect evidence that the owners admitted their guilt that the company was brought to the disastrous state). But they came up with a relatively painless scheme for themselves. The businessmen offered Rostec to take the entire Tractor Plants concern so that the corporation would have all military plants. And they asked to leave them 40% of the civil production. Another condition is a loan from VEB in the amount of 9.3 billion rubles.

This scheme was studied in the government, but soon the head of Rostec, Sergey Chemezov, made it straight. First, he said: "We do not need the tractor plants." And soon he said that Rostec had no plans to give a guarantee on loans for Tractor Plants. That does not negate the fact that the defense group's assets, including Kurganmashzavod, will be transferred to Rostec. However, at the end of 2016 the idea was voiced that this decision may be temporary. It was announced by the first deputy head of the Ministry of Industry and Trade, Gleb Nikitin. But judging by the fact that Rostec's bank initiated a bankruptcy procedure, "temporary" can easily be "constant". As for the private owners, they will retain the civil companies and huge debts. In general, the business failed. Although it is possible that entrepreneurs could have negotiated someting with the government: there's enough secrecy in the affair.  

Transparent defense issues

Probably, the idea that defense enterprises better be administered by the state will be voiced again and again. In this thesis, of course, there is a sensible grain. But if you follow this logic to the end, then, for example, the Pentagon is to seize Elon Musk's "SpaceX" because it fulfills military orders. Or, on the same basis, grab "Microsoft". Another thing is that the defense companies must clearly and in due time fulfill its obligations to the military, and workers shall be paid on time. Kurganmashzavod does not really fit in these standards. But on the other hand, there are voices in defense of private owners: it is believed that had they not taken the plant under their wing before, it might have been already dead. However, there is always a reply to such arguments: "It's been a long time ago".