Sergey Kogogin, General Director of KAMAZ PTC, became a new interviewee in the “Special Guest with Tina Kandelaki” show. Live on the RTVI channel, he told about the impact of the pandemic on the domestic auto industry, about import substitution and labour shortage. He named new promising markets for the auto concern and explained why KAMAZ had stopped producing military vehicles, why prices for vehicles were still rising and what to do with this. To add to this, the head of the corporation shared his opinion on prison labour at Russian production plants and announced the upcoming introduction of the Russian electric car Kama-1.
Sergey Kogogin is a Russian manufacturer and politician, General Director of KAMAZ PTC. In the 1980s, he took engineering and technical positions at enterprises Era and Zelenodolsk Engineering Plant, which he headed in 1990. In 1994, he was appointed manager of the administration of Zelenodolsk Region, Tatarstan. In 1999, he took the position of Deputy Chairman of Tatarstan’s Government. In June of the same year, Kogogin entered the Board of Directors of KAMAZ, and, in April 2002, he headed the auto concern as General Director. Awarded the Order “For Merit to the Fartherland”, Class IV. Married to Alfiya Kogogina, Deputy of the Russian State Duma, the United Russia fraction. With two sons and a daughter.
About the Dakar rally and influence of politics on sport:
“This year [the Dakar rally was held fr om January 2 to 14 in Saudi Arabia – RTVI’s note], politics had an impact, not on us, but on the MAZ team. It is unfortunate that the athletes spent years for training and upgrading their vehicles, but failed to participate in the race only because of political affairs. When it comes to a rally raid as a discipline, it is such a difficult sport that it is almost devoid of political influence. This is a commercial race for the right to participate in which racing teams pay to organizers, not vice versa.”
About KAMAZ’s dependence on foreign producers of microelectronics and other components:
“Several industry-related events in 2020 (fires in chip production plants, sever weather events in Texas) resulted in a deficit of chips worldwide. Not this year, but next this problem will be solved on our planet because production capacities are developing. Just it is impossible to do it in one moment. How does it affect us? If we take a vehicle of the third generation, it has about six on-board control systems or processors, a new generation vehicle has 57 such items. Here is an answer to this question. A car can’t be made without electronic components.
We produce gearboxes, 80% localized in Russia, but widely used speed synchronizers are imported from Germany. Every year, ten millions of these products are made at one facility in Northern Germany. By the way, supplies from there were stopped because of recent flooding. They had been restoring the plant there until last summer, such things happen. We filled this gap with the help of our stock. And there is one special thing: I have long been working on one position, and I communicate personally with almost all large suppliers of KAMAZ. I can always call every person I need to talk to and discuss these or those issues in person.”
About import substitution:
“It is impossible [to substitute imported products – RTVI’s note] completely. This country is integrated in the global system – just the way KAMAZ is integrated in the global auto industry. From our point of view, we tried our best to localize components here. Anyway, you can’t produce everything. Let’s take chips, for instance, they are mainly produced in Taiwan. The rest is made in the USA and China, but the volumes are not that high.
I think there are two strong factors to drive import substitution and localization more quickly. The first is sharply increased costs for logistics. Previously, logistics took an insignificant part of the item cost. And if earlier you could participate in global labour distribution, now it’s becoming expensive. The delivery of a container from China has become five times higher [in price – RTVI’s note] during the pandemic period. It’s becoming better to localize some products, and this is economically reasonable. The second factor is a political issue. COVID and political stability urge us to draw [production – RTVI’s note] closer and closer.”
About sanctions:
“One can tell different things about sanctions, but they probably bring more advantages than disadvantages in this country. As early as 2014, KAMAZ did a lot to avoid the “red zone”. The task was to decrease Rostec’s share – and we did it; The task was to stop producing military vehicles – and we took this enterprise outside KAMAZ and stopped producing military vehicles. All steps were taken, and we were sure that there were no reasons to include us in SDN List.”
About the pandemic influencing the company’s development:
“It has become clear that our system of just-in-time supplies doesn’t work. It resulted in one thing – we started increasing our stock. If the product flow from China to Russia doubled, then, obviously, there should be more products in this network. We took these actions. We don’t like it in terms of finance, but at the same time it helps us to work without worries. We haven’t lost anything during these two pandemic years, we have only gained. Our financial performance for this period is stable and growing.
Production facilities in Naberezhnye Chelny employ 24 thousand people. In the first pandemic year, 1300-1500 of our workers got ill at one time. The same number of people were engaged in preventive actions, therefore we lost more than three thousand people in the production process. It was a difficult time, but the employees realized what was going on. We talked with the workers about the necessity to work more days, sometimes at weekends.
Do you remember a decree on lockdown? We didn’t want seven days of idle time, it would cost us a lot. We gathered our directors of plants and asked them to address the staff with a suggestion of working on Saturday and Sunday and going under lockdown on Monday. And you know, everybody worked, and we lost only three days instead of five days of the set period.”
About growing prices for the company’s products:
“For KAMAZ’s direct contracts, prices [for products – RTVI’s note] grew by 9-10% on average. For retail dealers, the situation may vary. It depends also on deficit. We regulate prices for our products by developing rules of cooperation with dealers. The main part of work is carried out directly. It is difficult to say about unit cost at KAMAZ. We produce vehicles of three generations: cheap vehicles are K3; a medium price segment, close to premium, is K4, products made with the use of Mercedes parts; K5 is a premium segment, our development from start to finish. Thus, prices for vehicles of neighboring classes can vary almost twofold.”
About rising costs of cars:
“There is a deficit of certain components, including above mentioned chips. The price for them rose sharply. Of course, all these costs fell on suppliers. Then there are inflation processes: during the pandemic, a lot of fiat money was issued. Not only in Russia, but in the whole world. And it was on a smaller scale here. I don’t think we could avoid such an inflation pace under these circumstances. It would have been almost impossible to change developed supply schemes amid the pandemic.”
About priority and promising markets for KAMAZ:
“These are vehicles of the premium segment [vehicles of the K5 generation – RTVI’s note], selling them is quite specific. The market should be ready for them. Our first task is to satisfy the needs of the Russian market. We are still far from saturation and fulfillment of our ambitions. Our second traditional market is Kazakhstan. We prepared a service network for maintenance of these vehicles, started sales last year. Local customers give positive feedback. The first vehicles are sold in Uzbekistan and Turkmenistan. We have already covered the CIS countries. A special focus is made on Belarus. Our vehicles proved to be good there during international operations. We have our sights on MENA, the Near East. The first vehicles have already been sent there.”
About job placement:
“Why is Naberezhnye Chelny facing an employment problem? Many years ago, when I started working, the company had 70 thousand employees. This was overemployment. We invented various means to synchronize staff rationalization at KAMAZ and job creation outside KAMAZ. There is a well-known project – the industrial park Master with 11 thousand people working there. Last year they produced items for 150 billion roubles. In terms of production volumes, they are closer and closer to the KAMAZ production at the facility in Naberezhnye Chelny. KAMAZ’s facilities, which are no longer interesting for the company, became a home for this project. It means, we optimized facilities, created jobs, and it resulted in a gradual flow of workforce. But what is the problem now in our company? We produce premium and low cost vehicles. We have old production facilities with low automation and outdated equipment. But there are also new production facilities with high automation. And we have to keep these two directions. We no longer donate our workforce to the city because now we cannot afford headcount optimization for the sake of efficiency.”
About shortage of skilled manpower and robotic process automation:
“I found many things happening in Naberezhnye Chelny very annoying. For example, the outflow of talented young people: more than 80% of school graduates leave for Saint Petersburg and Moscow to study in universities, some of them go to Kazan, and almost nobody comes back. This is why intellectual potential is decreasing here, while we are upscaling our scientific research and developments. We cannot put up with it. We ask republican and federal authorities to develop universities, we are ready to support this area. Let’s set up more colleges and make them more effective, let’s create engineering classes in schools in order to refocus schoolchildren to engineering occupations. It works. To my mind, the problem of personnel shortage can be solved only by increasing labour productivity.
The company considered robot automation programs. We decided to reach the upper lim it of robot implementation no matter how. We have 26 robots per 10 thousand employees. Our aim is to increase this figure to 140 robots for five years.”
About migrants and prison labour:
“We are using this opportunity [employment of foreign workers – RTVI’s note]. Several hundreds of people from Uzbekistan are working at KAMAZ today. I would like to emphasize that they are very trainable. For two weeks of training they are learning their profession very well to be ready to work. Thus, we have partly solved the acute problem [problem of staff shortage – RTVI’s note] by engaging migrants. Beside, we indexed the workers’ wages for last year higher than usual. In 2021, the wages in the company grew by 25%. We also increased a social package which included delivery of free food to the workplace. As soon as we had done it, we started feeling stabilization in winter, that is we both engaged foreign workforce and stabilized the staff.
This issue [the use of prison labour – RTVI’s note] is more like a charitable deed for me. We give jobs to those people who dropped from ordinary life. And very often these are people with a college degree, with good potential. If we give them [prisoners – RTVI’s note] an opportunity to work in the environment wh ere they can somehow come back to normal life, instead of sitting idle in a cell, this is humanely, I think.”
About prospects of hydrogen fuel usage:
“I believe in this focus area. I dug through a considerable body of work existing in scientific literature in order to learn what it is like. This is a kind of energy that will be highly demanded by humankind after solving a number of problems with its storage and explosiveness. This is not cut off from reality. All hydrogen-related problems have technical solutions. The most difficult issue is to create infrastructure. Imagine traditional liquid fuels. So much money was invented in the appropriate infrastructure globally: these are refineries, pipelines running between local storage plants, filling stations on all territories. To create all this [for hydrogen fuel – RTVI’s note] will be very expensive and difficult.
As for vehicles, we will solve these problems. The specific energy of hydrogen is very high. Hydrogen is the most abundant element not only on Earth, but in the Universe.”
About plans to produce electric cars:
“The working title of this project is Kama-1. Ruben Vardanyan [Russian businessman – RTVI’s note] and I acted as investors of this project. We are both members of the KAMAZ Board of Directors. These electric cars are expected to go on sale in 2024-25. We don’t intend to compete with big carmakers who have already invested enormously in this industry. We have found our niche, and this is taxi and car sharing.
There is much interest in this area today. We receive a lot of requests, and not only from Russia. The production is not so complicated. Russia has several plants for car production which one can buy up reasonably and arrange production process there.”
About the most difficult period of KAMAZ management:
“The severest crisis was at the very beginning, when I only started to work in the company. It was a big challenge for me. That period was the most difficult. And, 2008, with its economic crisis. All this happened quite unexpectedly. Then I believed in our team absolutely. Within a month we took all necessary decisions and realized them during three days. This saved our company and enabled to minimize costs. Then nobody argued, we agreed on measures and did our work without delays.”
About plans after retirement:
“I don’t think about it. I’m an active person, and it is early to think about retirement so far. Five years ago, when I launched modernization of the plants, I thought that my task till the end of my professional career was to modernize production and create a new, modern product. I have completed this task. My next goal for the following period is to put to market low-carbon transport and secure a foothold there so that KAMAZ could finally become an innovative company looking ahead in the long term.
I devoted so much effort to KAMAZ, and I like the company I work for. My business can’t become boring because every day we invent something new, and every year I see results of my colleagues’ and my own ideas. When time for rest arrives, I would like to face it working at KAMAZ.”
About a possible successor:
“This is a right approach, but I’m not very good at doing it [grooming a possible successor – RTVI’s note] because all members of the team I’m working with know one another very well. People surrounding me have been working at KAMAZ for 30-40 years, 25 years, 15 years. This is not an easy task to choose a replacer. But there are many young talented people around me who can surely take my post in several years.”
The new episode of the show is available on the YouTube channel of RTVI.
RTVI is an international Russian-language multi-platform television network headquartered in New York, established in 2000. It comprises a TV-channel, a website and accounts in all basic social networks. The total multimedia coverage is 225 million people. The total reach of the TV-channel is 22 million people. The quantity of broadcast operators exceeds 200 all over the world. The channel is available on various platforms in 69 countries, including the USA, Canada, Europe, Israel, the CIS and Baltic states. In 2021, the channel started broadcasting in Asian countries. News bureaus are located in 13 cities around the world, including New York City, Los Angeles, Moscow, Tel Aviv, Berlin, Riga, Yerevan, Tbilisi, Kyiv, Tallinn, Paris, London, and Vilnius.