Tatneft: 10 years in tire business
In 2000 the government of the Republic of Tatarstan decided to sell to Tatneft oil major state-owned stock in Nizhnekamskshina tire producer and Nizhnekamsk Technical Carbon Plant. At present Tatneft is a major supplier of tires on the Russian market. Tatneft Director General speaks about the tire business.
Shafagat F. Takhautdinov has been Tatneft director general since June 1999. Born in April 1946 in the village of Abdrakhmanov in Almetyev district of Tatarstan he finished a vocational oil school and graduated from the Gubkin Moscow Institute of Petrochemistry and Gas Industry. In 1965 he began to work as a well driller assistant at the Almetyev boring company. He later worked as an oil production operator, underground well overhaul foreman, and shop manager of the same company, as well as a department head of Jalilneft Company, and head of the oil and gas producing department of Almetyevneft. In 1985-1990 he was first secretary of the Leninogorsk city committee of the Soviet Communist Party. He then worked as chief engineer and first deputy director general of Tatneft. From 1995 he was deputy of the State Council of Tatarstan. He is a member of the State Council commission on economic development and reforms and has the degree of Doctor of Sciences, Economy. He is president of Ak Bars ice hockey club and president of the Ice Hockey Federation of Tatarstan. He is a laureate of the State Prize of Tatarstan and was awarded with the Orders For the Merits to the Motherland IV degree, Red Banner of Labor, Friendship, and the medal of Valorous Labor. He was also decorated with Alf-Fahr Honor Order second degree.
– Tire production history in the republic began in 1968 when the first facility of the Nizhnekamsk tire plant was built and commissioned. By that time the country embarked on the course of modern automobile engineering. Lada cars and KamAZ trucks appeared. The production rapidly developed and demand for tires was immense.
– How did the fate of Nizhnekamsk-shina develop? Why did Tatneft come to the tire business?
– The enterprise was successfully developing and in 1986 launched the licensed production of Italian Pirelli tires. During perestroika (1985-1991) the products of the enterprise served as a kind of surrogate domestic currency not only on the “small” Nizhnekamsk market, but across the whole of the republic. At the time when whole industries collapsed Nizhnekamskshina preserved leading positions and even competed with foreign producers.
However economic collapse in the early ‘90s dealt a blow to tire producers as well. Changing external conditions, including commodity supplies and product sales, deteriorated the situation. Tire production volumes dropped, competitiveness fell, and sales of tires and raw material provision became more complicated. Economic and financial performance left much to be desired, production capacities were loaded only 60-65 percent, equipment was morally and physically worn out, and the line of products had to be urgently revised.
– But some measures were taken anyway…
– The government of Tatarstan began implementing a series of measures to raise tire production efficiency in the republic. Situation analysis showed that Tatneft participation in the management of the tire complex would increase efficiency of operations. The major condition advanced by the government was obligatory financing of investment projects by Tatneft. It coincided with our strategic vision of participation in the business.
As for other terms, they mostly concerned preservation of social stability, development of the social sphere, re-training of the white and blue collars, protection of the environment, and, naturally, current payments to the budget. The terms corresponded to the policy of our company. Thus, in 2000 Tatneft became a full-fledged participant in the tire business.
– How did the company succeed to improve the situation at Nizhnekamskshina?
– It was a difficult and long process. The first steps of Tatneft in the tire business targeted financial and economic recovery of the enterprise, debt rescheduling, cooperation with banks and investors. An investment program to expand tire production was launched. Total investments, including Tatneft loans, comprised close to 30 billion rubles in ten years. The first major project of the program was the production of highly efficient radial car tires under the new KAMA-EURO brand. Two million new-generation tires were annually produced by Pirelli license in the framework of the project.
The recovery effort specifically targeted cost optimization, including decreased material-output ratio, automatic production processes, new technologies introduction, improved labor norms and use of material resources. Since 2005 the goal-oriented Energy-Saving program has been implemented which provided for a half of the total effect of cost optimization measures.
Tatneft designed and implemented financial support measures, including acquisition of Nizhnekamskshina securities and loan provision. In a word, Tatneft has gradually implemented a complex of measures in all spheres of activities of Tatarstan’s tire industry, including the social one.
– Can you speak in detail about investment projects?
– I’ll speak about the major ones. Modern requirements to tire quality urged to modernize the production of raw materials and prefabricated parts. A rubber-mixing line was built. To increase the quality and operational characteristics of radial car tires the reconstruction of the assembly facility was launched. The project is nearing completion. It aims to continue introducing Pirelli technologies into mass production. The total volume of new products will comprise 2.86 million tires for cars and commercial trucks. Besides, the implementation of the projects also involved rubber and equipment suppliers and services providers. Feed pipeline was built from Nizhnekamskheftekhim to Nizhnekamsktekhuglerod, machinery pool was radically renewed, and the program to modernize technical carbon production is underway.
The final investment stage in the past ten years was the construction of an all-wire tire production facility (TsMK) which was a breakthrough for the whole country. None of domestic tire producers has launched such production in full volume in Russia so far. All-wire tires are distinguished by high reliability and endurance and help increase carrying capacity 8 percent. The possibility to restore tire tread increases the service life up to 500 thousand kilometers. The tires save from 10 to 15 percent of fuel and meet European environmental standards.
The project offers a promising guideline for tire business development. As European experience shows, all-wire tires account for 90 percent of total truck and bus tires.
By 2011 the Nizhnekamsk facility will reach projected capacity of 1.2 million tires a year. Thus, 70 percent of all-wire tires in the country will be produced by Tatneft’s tire complex.
– You had to introduce new management schemes during the years, didn’t you?
– The third guideline in tire complex recovery was the program to streamline the production management organization and structure. Tatneft’s top managers and leading experts joined the boards of directors of tire enterprises. To enhance the performance of all facilities the Tatneft-Neftekhim Management Company was set up to govern finances, property, investments, corporate relations, and strategic development.
To ensure safety of tire production Tatneft acquired controlling stakes in several technologically related enterprises both in Nizhnekamsk (mechanical plant) and far away, for example, Yarpolimermash, a major producer of tire and rubber equipment in the CIS.
One of the major guidelines of the program to upgrade management organization and structure comprised measures to restructure the tire complex – projects to reorganize the business itself, as well as non-core and servicing types of activities. Eateries, servicing household facilities, IT and communications, automobile transport and mechanical services were separated into self-sustained entities. The transfer of personnel to the self-sustained services decreased production workforce over 30 percent. Labor productivity grew 30 percent on average. Costs per one ruble of services dropped 15-20 percent.
The created structure helped stabilize operations of Nizhnekamsk tire producers and rapidly resolve current production and strategic tasks.
– You listed numerous projects and programs implemented by the tire complex in ten years. How did it all affect production and sales volumes?
– I will cite several figures. Production growth rate has been reported since 1999 and tire output upped 1.5-fold by early 2008 to 12.4 million pieces a year. In 2009 the crisis in the domestic car industry decreased production growth at the tire complex. However, the share of our enterprise in domestic tire production grew 1.5-fold to 41 percent.
By Valery SAMOILOV