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Meeting with Chairman of USC Board of Directors Georgy Poltavchenko

November 3, 2020, St Petersburg

The President discussed urgent issues in shipbuilding with Chairman of the Board of Directors of the United Shipbuilding Corporation (USC) Georgy Poltavchenko. The meeting took place aboard the new diesel-electric icebreaker Viktor Chernomyrdin.

President of Russia Vladimir Putin: How is the company doing?

Chairman of the USC Board of Directors Georgy Poltavchenko: Thank God, Mr President.

First, I would like to thank you on behalf of not only our company but also the entire defence industry. Do you remember that over a year ago I reported to you that there were problems with old debts that were nearly impossible to repay? You then instructed the Government to support us and the defence industry as a whole. Now we are receiving these allocations, and they are of great help in reducing the financial load. Thank you very much.

Today, I am happy to report that we are commissioning this great icebreaker and that, in general, the goal of increasing the output of civilian products, which you set for us, is being accomplished.

Of course, there are difficulties with the current economic situation in the world, but I can say that today we are carrying out 113 civilian construction contracts worth about 503 billion rubles. This year we will fulfil 19 orders and have already completed 11. I believe we will fulfil the programme for this year. In principle, we also believe that we will fulfil our obligations in the years ahead despite the problems.

There are some problems that basically make our life a bit more difficult. These include the sanctions that are being imposed on us by our so-called partners.

Vladimir Putin: Components.

Georgy Poltavchenko: Yes, and this is making it much more difficult to get the needed components.

We have to find the solutions to many problems here at home. In principle, I can say that this is also probably helpful. Thus, last month we commissioned the Arktika nuclear-powered icebreaker: the domestic content of that ship is basically 93 percent. Together with our allied suppliers we had to restore certain competences, which we did. The icebreaker passed the tests successfully. I think this is a good sign for all of us, that we can and must cope with the many problems that our friends are creating for us out of nowhere. So, in this context I would like to report to you that we have no difficulties.

There are of course coronavirus-related problems. Regrettably, some of our workers have to reduce output where outbreaks occur. You know that during the last wave we had problems in Severodvinsk, but now they are being resolved. And in general…

Vladimir Putin: Are your plants operating?

Georgy Poltavchenko: The plants are operating. We have about 97,000 workers in the corporation. People have a positive outlook, they earn good salaries. The average for the USC is about 62,000 rubles.

Vladimir Putin: Are you introducing any sanitary measures? How is this going?

Georgy Poltavchenko: We have had plans for this since the spring. Of course, it is a plan on paper, but it is being carried out. Temperature is checked at the entrance, and during working hours people use individual protection gear. Workers with elevated temperature or any signs of illness are not allowed to work or come in contact with other employees. The majority of people are responsible enough to observe these basic measures of health safety.

Vladimir Putin: Are the workloads at your companies high?

Georgy Poltavchenko: Yes, workloads are very high. In fact, some of our companies that would ordinarily be ready to fulfil certain orders are not bidding in tenders because they cannot meet the deadlines. They are so loaded that they cannot guarantee beginning construction on schedule.

As I said, we are now working on 113 civilian orders. Understandably, we are very much involved in carrying out the state defence order. This year we will commission 18 products for our Naval fleet and today almost all our berths are occupied. Building berth capacity is one of our problems.

As for the problems – and these can always be discussed at length – they do exist. I reported to you about them last time. Thank you for also supporting our request at that time. You instructed the Ministry of Industry and Trade to draft a programme for building new docks. This is really a serious problem (especially as regards floating docks). It impedes our current work because the average age of the floating docks in our industry is about 50 years or more. Naturally, this creates certain difficulties in our activities. And the fact that we are about to develop a dock programme and we will carry it out, will help mightily.

Vladimir Putin: You mentioned problems. There are several, of course, but the main three problems concern prices, deadlines and quality. How are your relations with your main customers?

Georgy Poltavchenko: This is always a challenge, Mr President, naturally. After all, we are a joint-stock company and one of our objectives is to make a profit. However, the state is facing more important goals. It must have modern fleet – both military and civilian. So we are always trying to strike a balance in our relations with our customers and maybe sometimes we have to sustain a small loss because our profit margins are already fairly low. However, we won’t quote figures because this is our business.

As for quality, today the corporation is actively improving it and reducing losses because this naturally results in lower prices. I must say that we have done and are doing a lot in this respect. In part, we are trying to find reliable suppliers because in many respects our work and meeting deadlines depend on suppliers.

Vladimir Putin: Subcontractors.

Georgy Poltavchenko: Yes, any delay in the supply of components naturally extends the construction schedule and makes it more expensive, no matter what you do. So, at this point, we have established a group of suppliers. These are trusted companies that have historically a good record of cooperation with us. We generally hold tenders among them, and we coordinate these procedures primarily with the Defence Ministry. I am referring to the state defence order in this respect.

By doing this, we save tens of billions of rubles every year. Our savings have been about 30 billion rubles.

Vladimir Putin: All right.


November 3, 2020, St Petersburg