Rybinsk takes over bankrupt snowmobile producer to diversify its business base

Published: 11/18/1999

Rybinsk Motors (RM) has completed its acquisition of the bankrupt special vehicle producer, the Volzhsy machine building plant, justified by Victor Glukhikh, Chairman of RM, as ensuring space to develop a more diversified business for Rybinsk over the next 20 years. Recently Rybinsk has become increasingly dependent on engine overhauls, given lack of demand for new Russian aircraft, with new engine demand significantly down despite a recent $10m contract from China. It is therefore looking to diversify to reduce its dependence on both state orders and the aerospace business. The acquisition of Volzhsy, which otherwise looks unpromising, may go somewhere to fulfil that diversification objective. The company has stated that it intends to start producing the new Taiga snowmobiles at Volzsky alongside vehicles built for the Ministry of Emergencies, Nuclear authorities and Gazprom. RM has made previous diversification elsewhere following other aircraft engine producers in producing land and sea based power plants derived from aviation products for the oil and gas industry. The company also produces tractor engines. Diversification is however, unlikely to resolve RM"s fundamental problem as an engine producer, obsolete equipment and no resources to upgrade or replace it, leaving them uncompetitive, regardless of substantial cost advantages. Despite this situation RM is reluctant to abandon its traditional business and is working with General Electric and Snecma on the possibility of producing the CFM56 for Russian aircraft, if there is any demand. Continuing to service what is proving to be a relatively buoyant business in engine overhaul, as efforts are made to extend the lives of the existing fleet.

Article ID: 1092