Sowing and Reaping the Benefits of Technology
- By Mark H. Gay
- Oct. 01 2014 00:00
A century-old family business is helping to modernize Russian agriculture and industry. Regional President Eastern Europe of CLAAS Group and General Director of CLAAS Vostok Bernd Ludewig told Mark Gay how its factory in the black earth region of Krasnodar sources a growing proportion of parts from local suppliers.
When did you first begin localizing production in Russia and why?
CLAAS has been in the Russian market of agricultural machinery for over three decades. We sold the first self-propelled forage harvester back in 1984 but modern history really dates from 1991 when we sold the first CLAAS harvester in Samara. So we have a long, common history with Russia, we know the local market and understand the needs of our customers who in return are loyal to the brand.
We have always regarded Russia as a country with great prospects and potential. At the same time we are very well aware of the desire of the Russian leadership to develop their own local production of agricultural machinery. So in 2003 it was decided to build the CLAAS plant in Krasnodar. Of course, this was preceded by heated debates and there were proposals to focus on Latin America. I am very glad that this decision has been taken and that we have come to Russia to stay.
And what is your strategy for the creation of such production and localization component of the base?
Increasing the amount of localized production is one of the biggest and most difficult challenges facing the company. We are actively working with Russian suppliers of components. Over 10 years we analyzed more than 1,400 companies. Unfortunately, to date, we have only established stable partnerships with 35 Russian suppliers so far. Their products meet CLASS's highest technical requirements.
In 2010 it was decided to expand the existing plant and organize the full technological cycle of production of agricultural equipment, including welding, painting and metal working. The volume of investment in the project exceeds 6 billion rubles. By 2015, the level of localization at the CLAAS factory level will significantly exceed 50 per cent. The capacity of the plant will increase by two to two-and-a-half times and the number of jobs will increase to 550.
Why did you choose Krasnodar as the location for your production plant?
We looked at different regions and Krasnodar region was chosen for a reason. Kuban showed the best performance in terms of investment attractiveness. The regional administration has done much to create favorable conditions for the arrival of foreign companies. In addition, it has a well-developed infrastructure, which is very important when creating your own production plant.
And finally, it has a well-developed agricultural complex. It has a yield of an average of 50 quintals (5,000 kilograms) of grain per hectare. This is a high figure compared to other territories. However, there are opportunities for growth here as well. For example, in Germany we manage to collect 80 quintals per hectare. One of the reasons for the higher technological level of production and† the use of modern agricultural machinery. We are confident that our machines can help solve this problem.
Have governments resolved the issue of trade measures on foreign-made combine harvesters or is this still ongoing?
Indeed, this year there is a limit on the import of combine harvesters into the countries of the Customs Union. The Russian quota is 424 harvesters, of which CLAAS' share is only 12. Does this sound fair? It seems to me that it doesn't. We have completed our quota for this year and despite our efforts many of our customers could not buy the harvesters they needed. Our position is that the buyer makes his own choice and decides what kind of techniques he whats to acquire. You only need to give him that opportunity. Quotas also narrow choice and hinder fair competition in the market.
Could you provide some numbers to illustrate the volume of your business here?
Today, the total population of self-propelled CLAAS vehicles in Russia is about 10 thousand units, according to our calculations. This includes grain and forage harvesters, tractors and telescopic handlers. Since our factory began operating in 2003 we have released about 5000 units. Currently in Russia we produce eight models of TUCANO combines; two models LEXION combines; and the tractors AXION, XERION and ARION. We are represented by dealerships in 57 regions of the country, which employ more than a thousand people.
Currently, one of the main goals is decentralization; we must become more reachable for our customers. In general, we strive to provide our customers with the same level of European quality of service. For example, we can deliver an item from our warehouse in Moscow to any region of Russia during the day.
The CLAAS Academy has opened in Voronezh. Could you talk a little bit about this project?
It's not enough in today's market for the manufacturer just to produce high-quality innovative techniques. It needs to constantly upgrade the skills of its professionals who work with these techniques. This is especially important for sales staff, customer service representatives, and, of course, for those who use our equipment on the ground. In order to meet this challenge the CLAAS Academy for the CIS countries was established in Voronezh.
Today the Academy is an important part of the corporation, not only in Russia but throughout the world. The number of trainees is growing. It trained 900 people in 2012, and this rose to 1,000 in 2013. There are plans to build a new Academy building near Voronezh on 16 hectares of land.
What is your view of the development of Russian agriculture with regards to the agricultural sectors that Claas supplies?
In general, we commend the development of the agricultural machinery market. The industry is growing, there is a good potential for development. Recent events have drawn attention to agriculture, so you can count on an additional influx of investment into the industry. We are confident about the future and believe in the future of our business in Russia. The proof of this is in† the large-scale expansion of CLAAS's project in Krasnodar with multi-billion ruble investment and the development of the dealer network in the regions.
What would help to develop agricultural machinery in Russia?
First and foremost, you need a level playing field in the market. After all, to create a modern Russian agricultural engineering sector you need a few companies that can compete with each other for the benefit of customers. Of course, this should be the companies that are actively involved in the localization of production and technology transfer.
Do subsidies help to promote specific agricultural sectors — or do they simply distort the market in the Russian context?
We support initiatives to establish mechanisms to support companies that have specific plans to localize its production in Russia. Formation of clear and understandable rules for the market are in the interests of both the manufacturers and farmers. It is logical that the state pays greater attention to those projects that are important for the development of agriculture. And it seems to me that the creation and expansion of the plant in Krasnodar is a good example of such a project.