Rostec

Rostec

Type	non-profit organization (Russian state corporation)
Founded	2007
Founder	Russian Federation (by a federal law)
Headquarters	Moscow, Russia
Key people	Sergey Chemezov (CEO)
Revenue	US$ 18,7 billion [1] (2015)
Owner	wholly owned by the Russian Federation as "State corporation"
Number of employees	450,000 (consolidated)
Divisions	Aircraft, Electronics, Armament
Subsidiaries	see below
Website	rostec.ru

Rostec (Russian: Ростех - Rostekh), formerly Rostekhnologii (Russian: Ростехнологии) is a Russian state corporation established in late 2007 to promote development, production and export of hi-tech industrial products for civil and defense sectors. It brings together about 700 entities which form 14 holding companies: eleven holding companies operate in the defense-industry complex and three are involved in civil sectors. Rostec’s organizations are located in 60 constituents of the Russian Federation and supply goods to over 70 countries worldwide.^[2]

Rostec was founded in 2007 as so called "state corporation", a type of legal entity in Russia. The state corporation is established by equity contribution made by the Russian Federation. The organization is headed by Sergey Chemezov.^[3] Its headquarters are located in Moscow.

The main goal of the corporation is to promote development, manufacture and export of hi-tech industrial products by providing support to Russian-based organizations on the domestic and foreign markets, as well as raising investment in organizations operating in different industrial sectors, including the defence-industry complex.^[4]

Name

Full name in the Russian language is Государственная корпорация по содействию разработке, производству и экспорту высокотехнологичной промышленной продукции «Ростех». Short name in the Russian language is Госкорпорация Ростех. Full name in the English language is State Corporation for Assistance to Development, Production and Export of Advanced Technology Industrial Product «Rostec». Short name in the English language is Rostec Corporation. Rostec was known as Rostekhnologii until December 2012.

History

On November 23, 2007, President Vladimir Putin endorsed the federal law^[5][6] to establish Rostekhnologii, a state corporation, passed by the State Duma on November 9.^[7][8] The state contributed 443 entities to the corporation’s capital.^[9] Their total loss was RUR630 billion; 30% of such enterprises were in pre-crisis and crisis condition, 28 entities in bankruptcy proceedings, 17 had no business operations, and 27 had lost part of their assets or faced a material risk of such loss. Executives of some companies included in Rostec were in conflict with each other.^[10] At the time Rosoboronprom, a company eventually merged with Rostechnologii, acquired the controlling interest in VSMPO-AVISMA in 2006, the on-going conflict between the shareholders exposed it to crisis. In October 2005, the Federal Financial Market Service (FFMS) suspended trades in common shares on the RTS Exchange and MICEX.^[11]

In 2008, Pirelli and Rostechnologii signed^[12] the Memorandum on the principal conditions of establishing a JV to manufacture tyres for motorcars and trucks. Initially, the parties intended to commence construction of a special-purpose plant in Togliatti; however, the initial plan was revised.^[13] In 2011, it was decided to launch production at the facilities of Sibur Holding^[14] from which the partners purchased Kirovsky and Voronezhsky Tyre Plants. Total value of the transferred assets was €222 million. Currently, the parties are upgrading the production facilities. In January 2013, Voronezhsky Tyre Plant launched a new production line.^[15] By 2015, the joint venture will manufacture 10.5 motocar and light truck tyres,^[15] with the production volume reaching €500 million.^[16]

In February 2008, JSC AvtoVAZ and French vehicle manufacturer Renault with an extensive input from Rostec signed an agreement on strategic partnership. The agreement launched a full-scale restructuration of the domestic vehicle manufacturer: Renault representatives were included in the top-management bodies of AvtoVAZ and its shares were distributed among the members of the consortium. The French company acquired a blocking stake in AvtoVAZ of 25% plus one share. In 2009, Renault and AvtoVAZ signed an additional agreement under which Renault made an asset contribution, including the transfer of technologies, production equipment and expertise valued at €240 million. The funds were allocated to modernization of AvtoVAZ’s production line and its upgrading to manufacture Renault and Nissan cars and new Lada models developed on the basis of foreign innovative technologies. This will allow AvtoVAZ to recover profitability and maintain the leading positions of Lada, Renault and Nissan brands on the Russian market. Since 2011, Renault-Nissan were negotiating buyout of the majority stake in AvtoVAZ with company’s co-owners Rostec and Troika Dialog. In May 2012, the parties reached a preliminary agreement to set up a joint venture to hold 74.5% shares in AvtoVAZ. They also agreed that Renault-Nissan Alliance would own 67.13% of shares. Their arrangements were legally executed in December 2012.^[17] Thus, Renault-Nissan and Rostec will contribute their interests in the plant (28%, 98% and 25%) to the joint venture which will further acquire 24.14% of shares owned by Troika Dialog. The actual stake of Renault-Nissan in AvtoVAZ will be 50.1% and Rostec’s stake 24.5% which is a blocking stake for the plant (according to historical distribution of AvtoVAZ share capital, only 94% of shares are actual voting shares, rather than 100%).^[17]

In 2006, VSMPO-AVISMA agreed with Boeing^[18] to set up a joint venture for machine processing of forgings for Boeing 787 Dreamliner^[19] and Russian-made aircraft. The parties signed the relevant agreement in 2007. It took two years to put up a new plant, employ and train personnel and install production equipment. In 2009, the new enterprise was launched as world’s most sophisticated production plant set up by Rostec and Ural Boeing Manufacturing. In October 2012, VSMPO-AVISMA and Boeing signed a memorandum to expand production capacity of Ural Boeing Manufacturing.^[20] The joint venture purchased four new machines which are scheduled to be installed in 2013. US$12 million will be additionally invested in the development.^[21] The partners develop new titanium alloys and technologies for aircraft engineering, in particular, «Ti5553»^[22] designed to reduce the aircraft weight.^[21][23][24]

In July 2008, Rostec signed an agreement with Metalloinvest to set up a joint venture to develop the Udokan copper reserve in the Chita Oblast,^[25] which resources are evaluated at 20 million tons of copper and 1.3 billion tons of ore or 30% of total Russia’s known reserves. In September 2008, Mikhailovsky Mining and Processing Enterprise, a part of Metalloinvest, won the tender for reserve development. A of mid-2012, the parties were performing preliminary work to commence the reserve development in Udokan. Copper production is scheduled to begin no later than June 2014.^[26]

November 11, 2008, Rostec acquired 25.1% of shares in WiMAX Holding Ltd, a major shareholder of Scartel, a WiMAX-Yota operator.

In November 2009, Rostec and Thales signed a memorandum on partnership and cooperation in electronic systems for the defence and airspace industries. The document regulates cooperation of two companies to share and use hi-tech developments in both defence and civil sectors.^[27] In 2010, the parties agreed to expand their joint efforts and signed an additional cooperation agreement which contemplated establishment of a joint venture for development, manufacturing and post-sales support in air traffic management and integrated modular avionics for civil aviation. This joint venture was set up at the premises of Vologda Optical and Mechanical Plant focused on licensed production of thermal imagers Catherine FC and Catherine XP and long-range multi-function binoculars Sophie-MF.^[28]

In 2010, Russian Helicopters, a part of Rostechnologii, reached an agreement with AgustaWestland, a part of Finmeccanica, to set up JV JSC HeliVert to assemble AW139 helicopters^[29] at a new plant located in the village of Tomilino, Moscow Region.^[30] Russian-made AW139 made its first flight on December 19.^[31][32] In 2012, the parties also decided to expand their cooperation and signed a preliminary framework agreement on joint development, manufacture and distribution of a 2.5 ton state-of-the-art one-engine helicopter.^[33]

The corporation has signed cooperation agreements with such organizations as UAC, USC,^[34] RZhD,^[35] Aeroflot,^[36] Lukoil,^[37] Gazprom^[38] and others.

The main communication mechanism with executive authorities involves cooperation agreements in various business areas, including promotion of development, manufacture and export of hi-tech industrial products for civil, double and defence purposes. As of September 2012, the corporation has entered into agreements with 31 regions and opened its representative offices in 26 constituents of the Russian Federation.

In December 2015, Rostec Corporation’s supervisory board approved its development strategy through 2025.^[39][40] The main objective of the strategy is to change the Russian economic model by diversifying the economy and increasing the share of high-tech civilian products and non-oil exports.

2012 rebranding

Corporate rebranding was announced December 21, 2012.^[41] The corporation changed its name, logo and slogan. Rostechnologii was renamed Rostec. A new logo features an open square symbolizing a window to the world and a focus frame. It reflects philosophy of the corporate slogan “Partner in Development”.^[27] The corporation also launched a new website in six languages (Russian, English, German, French, Spanish, Arabic and Chinese). The languages were selected with a view to those countries and regions which emerge as the corporation’s largest customers.^[41] “Communications and brand management increasingly affect the value-added of products,” Sergey Chemezov, Rostec’s CEO, said. “We need the international brand to commit global technology and financial leaders, successfully pursue corporate strategy and enhance corporation’s capitalization”.^[41] According to The Wall Street Journal, rebranding^[27] is designed to make the corporation more open.^[27] The corporate rebranding project was implemented by Apostle, a strategic communications center, and Ilya Oskolkov- Tsentsiper, founder and co-owner of Winter, a UK agency. Graphic design was developed under supervision of Hazel Macmillan^[42] (British Airways is among her latest projects.) The website was developed by SomeOneElse, a UK-based agency which projects include HSBC, Land Rover and BBC. The corporation spent $1.5 million for rebranding.^[27]

According to an assessment carried out by the Swiss consulting company Assessa, Rostec’s corporate brand has a value of RUB 31.2 billion.

The corporate brand, which was launched in late 2012, is currently one of Russia’s 15 most valuable brands and has a value similar to that of major companies such as Rosneft and Rostelecom.^[43]

Rostec was the one of first Russian state corporations to use the full potential of modern communication technologies. The policy of information openness allowed the creation of a new image for the state company.

Clusters

In late 2016, Rostec includes about 700 organizations.^[44]

Holding companies of the group:^[45]

• Concern Radio-Electronic Technologies: military spec radio-electronic, state identification, aviation and radio-electronic equipment.
• Kalashnikov Concern: Russia’s largest manufacturer of combat weapons.
• Shvabe Holding: optical-electronic systems both for military and civil purposes;
• United Instrument Manufacturing Corporation: communications tools and systems, automated control systems, electronic security and robotic systems;
• Technodinamika: developer and manufacturer of aircraft equipment, including chassis, fuel systems, flight control systems and auxiliary power units;
• Nacimbio: pharmaceutical holding for research and development of immune biological remedies.
• RT-Chemcomposite: specializes in innovative research and development in the field of polymer composite materials and integrated products for space exploration, aviation, arms and military equipment, ground and water transport, power utilities and other industries.
• RT-Stankoprom: machine tool industry.
• Ruselectronics: electronic components, electronic devices and equipment, microwave equipment and semi-conductor devices;
• High Precision Systems (Vysokotochnye Kompleksy): weapons for the combat tactical zone;
• Concern Avtomatika: the largest enterprise of the Russian Federation concerned with problems of information security, with development and production of secrecy communication equipment and systems, protected information and tele-communication systems and also special automated control systems.
• Techmash: ammunition supplies for the Armed Forces.
• RT-Auto: owns stakes in AvtoVAZ and Kamaz.
• Oboronprom
  • Russian Helicopters
  • United Engine Corporation: engines for military and civil aviation and space exploration programs.
• Security Technologies

Directly controlled companies of Rostec:^[46]

• Rosoboronexport (arms export)
• VSMPO-AVISMA: produces 30% of the world’s titanium.
• AvtoVAZ (car manufacturer, minority stake)
• Kamaz: leading Russian manufacturer of trucks.
• RT-Global Resources (raw materials)
• RT-Invest (diversified, minority stake)
• RT-Business Development: charged with implementing the Rostec strategy aiming to increase capitalization of projects in the sectors of commercial advanced technologies, raw materials and associated infrastructure.
• Russia TEC (exhibition complex)
• National Ecological Operator (waste management)

Supervisory board

• Manturov Denis Valentinovich, Minister of Trade and Industry of the Russian Federation, Chairman of the Supervisory Board;
• Chemezov Sergey Viktorovich, CEO at Rostec;
• Borisov Yury Ivanovich, Deputy Defence Minister of the Russian Federation;
• Brycheva Larisa Igorevna, Assistant to the President of Russia; Head of the State Legal Directorate in the Presidential Executive Office;
• Levitin Igor, Aide to the President of the Russian Federation;
• Siluanov Anton, Minister of Finance of the Russian Federation;
• Ostrovenko Vladimir, Deputy Chief of President’s Administration;
• Ushakov Yury Viktorivich, Aide to the President of the Russian Federation;
• Fomin Alexander Vasiliyevich, Deputy Defence Secretary of the Russian Federation.

Financial performance

The preliminary financial performance for 2012 show that the overall revenue of Rostec exceeded RUR960 billion compared with RUR817 billion a year earlier.^[1] Revenues from export to 70 countries globally exceeded RUR240 billion.^[47] Rostec’s net profit in 2012 was almost RUR40 billion. Corporation’s companies paid over RUR120 billion in 2012 tax. Investments in modernization and production growth exceeded RUR112 billion. The average monthly payroll went up to RUR26,200 from RUR23,700 a year earlier.

Main financial indicators,^[48] 2015 ($1 = 60,96 RUB):

• Consolidated revenue, $18.7 bln
• Consolidated net income, $1.62 bln
• Export revenues, $5.0 bln
• Total investments, $2.1 bln
• Exports of innovative products, $1.81 bln

Social policy

The companies controlled by Rostec employ about 450,000 people.^[49] A special focus of corporation’s responsibility involves 21 dominant employers which are part of Rostec.^[50] As a good example of corporate activity aimed at stabilization of social environment in one-company towns mass media covered Rostec’s policy pursued in relation to AvtoVAZ, a dominant employer at Togliatti during the 2008-2009 economic crisis. Despite large-scale layoffs, public unrest was prevented by a special employment program for dismissed workers.^[51] The unemployment rate in Verkhnyaya Salda, Sverdlovsk Region, a company town of a VSMPO-AVISMA enterprise,^[52] is less than 1%.^[53]

In order to implement its Health National Program, the corporation has set up nine centers for high medical technologies.^[54] Five centers for cardiovascular surgery (Khabarovsk, Krasnoyarsk, Chelyabinsk, Perm and Kaliningrad), two centers for neurosurgery (Tyumen and Novosibirsk) and to centers for traumatic surgery, orthopedics and endoprosthesis replacement (Smolensk and Barnaul).^[55]

Rostec is a participant in the Perinatal center development program along with the Ministry of Health of the Russian Federation, the Federal Compulsory Medical Insurance Fund and federal member state authorities.^[56][57]

In March 2017 company builds and equips perinatal centers in 15 member states of the Russian Federation:

• 6 republics: Bashkortostan, Buryatia, Dagestan, Ingushetia, Karelia and Sakha (Yakutia);
• 9 regions: Archangelsk, Briansk, Leningrad, Orenburg, Penza,^[58] Pskov, Smolensk, Tambov and Ulianovsk.

Rostec pursues cooperation with leading higher educational institutions, including, among others, Bauman Moscow State Technical University, and the Plekhanov Russian University of Economics.^[59]

Sponsorship

On November 27, 2007, Rostec became general sponsor of FC Krylia Sovetov Samara; however, in 2011 the corporation decided to suspend its support of the team.^[60]

In 2010 and 2011, Rostec sponsored Vitaly Petrov, Formula One racing driver. In 2012, Russian Helicopters partnered with Caterham F1Team for which Petrov drives.^[61]

Improving professional training of the employees, Rostec cooperates with the WorldSkills movement.^[62] In 2015 the Corporation and WorldSkills Russia concluded a cooperation agreement which is aimed mainly at the joint work on training specialists for high-tech industries. State Corporation Rostec is a general partner of WorldSkills Russia in accordance with a three-year agreement.^[63]

References

External links

• (in Russian) Rostec