Russian Military Industry
The present condition of Russia's defense sector is critical, and the reasons are well known. One is the aging of highly qualified production personnel, many of whom are approaching retirement age. Engineering school graduates are unwilling to take jobs in the defense sector because of low wages. No worker replacements are trained anywhere in the country either. Earlier, it was taboo to draft workers from defense factories into the army. Now this privilege is abandoned, and graduates of the few surviving vocational schools seek employment elsewhere, but not in the defense sector where receiving a foreign travel passport is a problem.
Another problem is the aging of the equipment in the defense industry: its production lines and machine tools have long passed the 30-year limit. Many key technologies have been lost as have co-production links. The uncontrolled growth of energy costs is outstripping inflation and is well above the deflators provided by the Economic Development and Trade Ministry. It was obvious that the 2006-2015 government defense order would fall short in both the range and quality of products ordered.
Beginning about 1964, ob'edineniia or associations of enterprises began to be formed again (they were used in the 1920s, but were dropped in the early 1930s). And in 1968, scientific-production associations began 'to be formed. These are composed of at least one R&D institute, with engineering design subdivisionst and production enterprises intended to put the newly developed products into batch production. The associations were greatly strengthened by government legislation in the spring of 1974. Clearly, these scientific-production associations represented a potentially significant organizational break in the R&D production chain.
The Russian Federation inherited the largest and most productive share of the former Soviet defense industry, employing as many as 9 million workers in 1,125 to 1,500 research, design, and production facilities. Russian defense industry wage increases had not kept pace with inflation, meaning that most Russian defense enterprises had steadily lost their best workers (estimates ranged from 800,000 to 1 million lost per year) to Western companies or the emerging Russian private sector. In 1997 the Russian defense industry consisted of over 1,700 firms and nominally employed some 2.5 million workers.
While defense enterprises were found throughout the country, a significant portion was concentrated in a dozen cities and regions, where over one-third of the labor force worked in defense. Those installations were concentrated in particular regions, whose economies tend to be heavily dependent on the industry; in the Republic of Udmurtia, for example, more than two-thirds of workers and industrial capacity were attached to defense in some way in the early 1990s. Moscow has large plants for air force and missile components, and St. Petersburg specializes in naval design and production as well as infantry weapons.
A Russian defense plant was, in some ways, a throw-back to a US factory-town. A "town-forming enterprise" completely provides for urban activity and permanently participates in different programs of social purposes. Such a defense plant is really a mini-city in itself, with its own apartments, doctors, clinics, restaurants, and power plants. Outside of Moscow and St. Petersburg, defense plant employees frequently live in company apartments, shop in company stores, and eat in company cafeterias. In the 1990s up to 80 percent of a defense plant's budget went to maintaining these social services. The plant manager was often as concerned with making deals to bring in potatoes and bread to feed his people as with joint venture agreements, and these and other transactions were often conducted on a barter-basis.
In a town-forming enterprise, the life and prosperity of citizens depended on stable work for the enterprise. A town-forming enterprise concerns itself with creation of more jobs, and so would establish productions line outside the mainstream business. In the 1990s plant managers often attempted to maintain production even without budget authority to keep workers busy. This led to an excess inventory of weapons, which plant managers tried to sell, even as the downsizing armed forces also sought to sell off now surplus military equipment.
By the mid-1990s most Russian defense enterprises would have been considered bankrupt in Western terms, and the situation worsened after the financial collapse of 1998. The Ministry of Economy reported that 400 defense enterprises were unable to pay their debts. The industry needed modernization and many defense enterprise managers were eager to learn about the basics of marketing, finance, and modern business practices. Many defense plants reduced operations to only a few days per week at most.
The Thirteenth Five-Year Plan of the Soviet Union covered the period 1991-1995. The Sixteenth Five-Year Plan would have covered 2006-2010, and the Seventeenth Five-Year Plan would have covered 2011-2015. It would appear that the demise of the Soviet Union did not erase the penchant for Five Year Plans, since both the Yeltsin and Putin governments released new long range plans every five years, coinciding with the intervals that would have been covered by the Soviet Five-Year Plan. In the United States, the conterpart activity is the Quadrennial Defense Review, on four year centers. Up to 90% of all machine tools are imported to Russia from abroad. The most critical is, according to experts, first of all, for the production of ammunition. How bitterly says one expert, Yuri Shabalin, "now own the machine tool in the ammunition industry, we do not exist in the country." According to the same Shabalin, in the defense industry is now working half of CNC systems are imported. And, in his opinion, "for you can turn off a specific signal is CNC or set wrong program." Like it or not, but its machine tool industry and its machine tool industry in Russia in fact is no more. However, there are no people who could work on these machines.
As recognized by the general director of "Uralvagonzavod" Oleg Sienko in 2015, "we really did not have and do not have enough skilled workers. First of all - operators of CNC machine tools, without which it is impossible to conduct a global re-equipment." By the way, he also listed some of the areas where entrusted to him tankostroitelnoe leading enterprise in the country suffered losses from the sanctions and the lack of supply of imported components: "We are under sanctions, it means that foreign banks and suppliers can not come into contact with us. We take very seriously worked on the creation of a locomotive with Caterpillar. But two days before the shipment of the products made at the site of our partners in Latin America, the sanctions were imposed. With Renault Truck Defense we have made a good car, intended for export. And our military liked it too. But we were forced to stop these processes. With Bombardier we have the same situation ... .Byli program and with other international partners, we are forced to fold. "
"Import substitution is very important, but it can be done any day or a year or even five years - realistically acknowledged CEO of" Uralvagonzavod ", - the competence of something we have lost. We need to replace the process of the twentieth century in the process of the twenty-first century .... But leave it years. We'll have a long time to catch up with what has been done in the world." Because if we want to create the best product, "we can not sure a top manager, to create one of the worst materials using poor equipment. The entire chain should consist of the best units."
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