Qualified staff bidding farewell to Pivdenmash

When Pivdenmash will order another rocket, will be no one collect it

Photo: Ukrinform

Ukraine’s only rocket-building company, the Makarov Pivdenniy Machine-engineering Plant (Pivdenmash), is on the verge of shutdown, its managers say. The plant is unable to pay wages in full due to the lack of orders as a result of which 40 qualified employees are quitting their jobs every day, Pivdenmash Assistant General Director Volodymyr Tkachenko told Capital.

He said the management of the plant is trying to preserve its personnel, but for the past several months has been unable to pay wages and in the best case scenario it pays wages in installments of 10% of the total amount owed for the summer months.

According to information of one of the senior managers at Pivdenmash, who requested anonymity, over the past months 700 qualified specialists have left the plant. This is nearly 10% of the total number of employees. Up until recently, nearly 8,000 workers were employed at the plant. As an interlocutor of Capital said, the current load at the plant is insufficient to maintain the staff or the plant’s operation. If the situation does not change soon, Ukraine will lose the status of a country with a viable aerospace industry, the management of the plant believes.

This year the Ukrainian government allocated a mere UAH 10 mn for the development of the country’s aerospace industry. For comparison, India spends US $1.2 bn a year on the aerospace industry and Russia spends around US $5 bn.

Shockwaves

Pivdenmash ended up in a state of impoverishment after a significant cut in orders from Russia, which guaranteed 80% of the enterprise’s production capacity, Tkachenko complains. Moreover, the projects Sea Start, Aboveground Start and the Dnipro program were frozen. “We are ready to put out products in their full volume, but the Russian side does not want to order Ukrainian products,” Tkachenko noted. The coffers of the plant were annually filled from sales of two-three Zenit rocket carriers on the Russian market with a price tag of US $40 mn. Not so long ago, the average annual turnover of the plant was UAH 1.8 bn.

The situation with other customers of Pivdenmash is rather complicated. The Ukraine-Brazil Cyclone-4 project for the launch of Ukrainian rocket carriers at the Alcantara Space Center is on hold. In addition to that, due to the review of contracts with the American Orbital Science Corporation, the Ukrainian plant cannot start its production line. In May 2013, the testing of the Antares rocket developed jointly with Pivdenmash and the Pivdenne Design Bureau by the U.S. corporation was successful. The Ukrainian companies signed the corresponding long-term contract (until 2019) with Orbital Science Corp. in 2008.

Not all Ukrainian enterprises that have worked for many years on the Russian market are experiencing similar difficulties as Pivdenmash. For example, the Antonov state enterprise that heavily depends on orders from Russia and partners cooperating in the production of aircraft managed to hold on to its personnel. As Chief Designer of Antonov Dmytro Kiva told Capital, the plant managed to re-group and not only retained its personnel of 13,500, but even raised their wages by 20% several months ago. Now, Kiva assures that Antonov has begun working with customers and partners in Latin America and Asia more intensively and is even establishing cooperation on the European market.

Saving grace

While Pivdenmash is counting on the financial assistance of the government, it is not about to sit and wait with folded arms. The plant is seeking additional orders, particularly for defense purposes and developing contacts with other companies for the diversification of its own production capacities. Tkachenko says the enterprise plans to expand the list of products it manufactures in order to continue to operate thanks to orders from other sectors. In particular, the possibility of manufacture of products for the energy sector and other machine-building equipment is being developed.

In order to overcome the crisis, the plant is prepared to increase its output volumes of tractors and electrical public transport vehicles and renew the production of wind-energy installations. Several investment projects that were highly praised by the State Aerospace Agency and are currently being reviewed by the Ministry of Economic Development and Trade have also been developed.

Rescuing brainpower

Military expert of the information consulting agency Defense Express Anton Mikhnenko feels that Ukraine should preserve its valuable human resources. Otherwise, the country will lose its intellectual science-intensive sector. He said that the Minister of Defense can fully support Pivdenmash with orders, in particular, for the production of tactical rocket complexes Korshun-2 and Hrom developed by the Pivdenne Design Bureau.

The expert says that on the Russian market a broader segment of the products of Pivdenmash was in high demand, while in other countries the demand for products of the rocket and aerospace industry is narrower. Nevertheless, this should motivate the company to promote its products by proposing a more attractive price-quality ratio. There is strong potential in counting on improvement of partner relations with the U.S. and seeking clients in the Middle East.