Russian economy is in a slowdown mode which affects rail freight traffic. The first quarter 2013 saw a decline in loading volumes 4.1% on a year-to-year basis (p. 11). The Ministry for Economic Development issued negative forecasts for 2013 regarding industrial output so this year RZD and private rail operators should take measures on savings and optimization of business processes.
RZD is taking steps to reduce costs and enhance performance, the private companies refused initial plans on buying new rolling stock. In 2012, Russian companies bought more than 90,000 cargo railcars. At the end of the year there was a decline in demand, especially in the gondola wagon sector. The reasons for this were the surplus of universal railcars, and prices for the service of providing wagons for transportation, which halved. The situation is even more critical in Ukraine. In 2012, the production volume there fell by 10.3% to 47,000 cargo wagons. In December, the decline was 43.6%. And the outlook is negative. Taking into account the escalating competition, Russian wagon building companies will lobby their interests for the Russian market to prefer products made in the RF (pp. 48-50).
Slowing of freight traffic was caused by falling demand for goods. Russian Railways expects the downturn will be only temporary and that it will be possible to reverse the negative trend through the company’s investment programme and the support it is receiving.
At the same time it’s not a crisis and it’s not the time to focus wholly on a day-to-day survival. RZD is going to become a logistics holding that provides not only transportation from A to B, but a door-to-door supply chain management. The strategy of RZD envisages enlargement of the range of transport services and mastering new geographical areas (pp. 6-9).
One of the steps taken towards this aim is the acquisition of GEFCO. Now RZD is integrating the company. The integration process usually lasts up to one year. The work is carried out in accordance with a special plan and affects all activities within the company – from strategy and business development to personnel matters and public relations. To coordinate these processes and control their timely implementation, RZD launched an integrating office, headed by the company’s Vice President Salman Babayev.
GEFCO’s CEO Luc Nadal in his exclusive interview with our magazine said that “the change in the shareholder structure is a very good opportunity for GEFCO for several reasons. RZD is a shareholder with a very solid financial base that has invested for the long-term. It will allow GEFCO to continue with its international development plans”. Further Mr Nadal notes that GEFCO’s new competitive advantage is that it belongs to RZD, a crucial company for the Russian economy that interacts with most of Russia’s manufacturers and has many assets which are useful for developing our activity: plots of land for car fleets for our clients, warehouses so we can organise temporary storage, terminals and of course resources necessary for rail transportation” (pp. 45-47).
Another track for development is the design and production of innovative wagons. The order of the Federal Tariff Service, setting the mechanism of tariff regulation for the use of cargo railcars with better functional characteristics, has been approved and now it is being registered by the Ministry of Justice. It seems, at last there will appear real mechanisms stimulating the demand for innovative machinery in the Russian railway machine building market. A number of companies, especially big ones, say that they are interested in adding such railcars to their fleet and welcome implementation of such tariff mechanisms. Meanwhile, some of their colleagues have doubts that in pursuit of customers, producers can fulfill new requirements pro forma (pp. 52-53).
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