Boeing Strikes $1Bln Titanium Deal

Itar-TassChemezov, right, and Burns watch over Kravchenko, left, and Tetyukhin at Thursday's signing ceremony in Moscow.
U.S. aviation giant Boeing on Thursday agreed to buy more than $1 billion worth of titanium components from domestic manufacturer VSMPO-Avisma for the 787 Dreamliner and other passenger aircraft.

Sergei Kravchenko, head of Boeing in Russia, and Vladislav Tetyukhin, general director of VSMPO-Avisma, signed a five-year agreement for the supply of components from 2011 to 2015.

"This contract is the biggest in the history of Boeing in Russia. I can't imagine a better gift for me and my team," Kravchenko told reporters at the signing ceremony, which was attended by Russian Technologies head Sergei Chemezov and U.S. Ambassador William Burns.

Kravchenko and Chemezov, whose newly created state corporation Russian Technologies controls VSMPO-Avisma, the world's biggest titanium-alloy producer, praised the accord as the first concrete supply deal between the two companies.

The agreement is part of a plan by Boeing to invest $27 billion in Russia over the next 30 years, Kravchenko said. Titanium products will account for $18 billion of that number, he said.

At Moscow's MAKS air show in August, Boeing and VSMPO-Avisma signed off on a 50-50 joint venture to make titanium-stamping parts for the Dreamliner.

The venture, called Ural Boeing Manufacturing, is located in the Ural Mountains town of Verkhnyaya Salda, where VSMPO-Avisma is based. The U.S. experts who will work for the joint venture have already moved to the area with their families, Kravchenko said.

Tetyukhin hailed the agreement as a "breakthrough" deal for his company, which had previously sold unprocessed titanium to Boeing. "We've completely stopped selling slabs," he said.

Under Thursday's deal, VSMPO-Avisma will supply 8,000 to 9,000 tons of titanium products per year, worth $450 million to $500 million, he said.

Tetyukhin said VSMPO-Avisma had been a good partner to Boeing over the years. As an example, he cited the titanium producer's actions in the aftermath of the Sept. 11, 2001, attacks on the United States. Although Boeing cut its titanium orders at the time, the only supplier that did not impose penalties on the U.S. firm was VSMPO-Avisma, Tetyukhin said.

Officials expressed hope that the deal would help to improve tense U.S.-Russian relations.

"When we sign contracts for decades and for billions of dollars, we are planning on our relations being stable and predictable," Kravchenko said.

Burns said trade and investment were the fastest-developing areas of cooperation between the two countries. Speaking in Russian, he welcomed the deal as one that would have "truly global significance."

Chemezov, a close ally of President Vladimir Putin, said the deal illustrated that foreign investors need not worry about working with a state company. "People who work there have a business attitude," he said, referring to Russian Technologies, and added that the corporation was investor-friendly.

Chemezov reiterated that VSMPO-Avisma, now 66 percent owned by Russian Technologies, planned to hold a public offering in the future. The state would retain a blocking stake in the firm, he said.