Crisis at the Gates?
Oleg Afanasiev, Head of OJSC KAMAZ’s Press Service
The first monitoring of Russian and foreign mass media after the corporate leave made me profoundly alarmed. The press somewhere hinted and somewhere openly told that the crisis in the global auto industry had reached us.
Already familiar headlines: “Peugeot to close Meudon plant near Paris to cut costs”, “Kia Motors sees 35% drop in Q1 profit”, “Detroit, the cradle of America’s automobile industry, filed for bankruptcy” were followed by new ones: “AvtoVAZ sales decreased by 11%”, “Ford Sollers said that it would reduce the number of shifts at its plant near St. Petersburg from three to two”. Other producers also state the fact of stagnation or breakdown of the Russian vehicle market.
The inquiry addressed by the press service to marketing experts didn’t bring good news. According to the marketing department of KAMAZ, the Russian market of trucks with GVW of 14-40 tonnes, that is our segment, has declined almost by a third for seven months of 2013! The reasons for such a drop include economic stagnation in Russia, our country’s WTO accession and a negative impact of this factor on industries using our products.
Most of our workers realize how such a decline tells on each of us. A sales slowdown results in fewer orders and therefore a shorter working week, which affects wage rates. We experienced this chain of events to the full extent in the first half-year.
Doesn’t the second half-year look promising either? This question was addressed by my colleagues to specialists of the company’s sales and marketing department.
The first question to Evgeny Pronin, First Deputy General Director of Sales and Service, was about the results of July, when most KAMAZ employees, except sales managers, were on leave.
— Mr. Pronin, what are the sales results of July?
— In July, KAMAZ showed good sales performance, the current plan for the domestic market is fulfilled. We shipped 3,095 vehicles on the inner market, 2,165 units of them to dealership centers, 517 to special equipment manufacturers and about 410 vehicles to our large corporate customers, including the Ministry of Defence of the Russian Federation. A little bit worse results were received in export; however we have been ahead of the business plan with its 119% execution during the latest seven months.
— And how can you describe our figures in view of the market situation and the general economy situation?
— This year’s truck market decline was 33%. It had its impact on us. We are 11% behind from last year’s results. And nevertheless we increased a market share from 34% to 47% last year. These achievements are a result of three main factors: quite an effective administrative work, a developed dealership network and those efforts which KAMAZ has been making to develop products and increase their quality for several latest years. All this resulted in a greater compatibility of our vehicles on the market and our higher market share. And steps which were taken by the company’s top managers under the Association of Russian Automakers in concert with state structures helped to ensure observance of equipment import regulations.
— And what can you say about prospects for the nearest months today?
— Unfortunately, the market situation is not improving. An investment activity is still rather low. It is proved by macroeconomic figures, in particular, the recent GDP growth. Undoubtedly, this tells upon us too. Our product is called-for mainly in the industry, and if there are no investments, the demand for our vehicles is low. At the same time, we think our current stock of orders is promising. Of course, there are certain “gaps” in the business plan execution, but we are trying to do our best to fulfill the current task in August, like in July.
Ashot Arutyunyan, Director of Marketing and Advertising, not only summed up the results of the past period, but also made a prognosis for the nearest months based on the marketing experts’ research.
— Mr. Arutyunyan, your department made a forecast for sales in July. Could you please tell us if your expectations came true?
— July was a rather successful month. Though I need to note that, since the beginning of the year, we have been a little behind the sales schedule, which was caused by a difficult situation on the market. Generally, this year somehow repeats events of 2011. The market is not so active as in 2012, but not so weak as in 2010.
— What should we expect from this August and forthcoming September?
— I hope that we will continue executing the business plan in August and September. According to my assessment, the second half-year will be more successful than the first one, and not only for KAMAZ, but for the whole market. One of the reasons for it is the fact that federal target programs were realized with difficulty in the first half-year 2013, some of them were implemented only 10-15%. It is quite obvious that the state and state corporations will take more active measures to use budget money which is intended for investing. And, in its turn, this will help both KAMAZ, and the whole commercial transport market sell more.
Summing up our managers’ results and prognoses in the sphere of sales and marketing, we can make a conclusion that the Russian truck market is stormy, and nobody is going to stop a storm warning till the end of the year. The market weather will improve if the country’s government takes serious measures to stimulate the economy on the whole.
On the other hand, crisis-hardened KAMAZ is much more confident than other market players in this storm. With a 30% general market decline, our sales dropped only by 11%. That is there are no reasons to panic, but we shouldn’t rest on our laurels either.
As usual, during a crisis, a customer sets stricter requirements to the product quality, and we have a lot of work to do in this area. Besides, the market is looking forward to KAMAZ’s new product – Long-Haul Tractor 5490 with a new cab which is developed with the participation of our partners from Daimler. In September, the company will launch a pilot production of the vehicle, and later on the new cab will be installed on other models too. The company’s top managers’ actions in the sphere of production modernization, introduction of a production system and human resource management are focused on strengthening KAMAZ’s positions on the market.
It is clear that each employee of the company wants to see his or her own prospects behind all these high-sounding words. Some people see them in career development, others see them in material welfare. It is important to understand that all these things are interconnected, and a chain to a customer as the main appraiser of our work starts from a mechanic, an ordinary specialist, a foreman, a shop manager or a division head, that is from each of us. And if a customer is satisfied, there’s an order, there’s a job and there’s a wage.
P.S. On the 21st of August, a commission will consider an operating schedule in September.
It should be recalled that two workless days are planned in September. According to Sergey Kogogin, General Director of OJSC KAMAZ, thanks to the sales managers’ active work, the company had managed to attract a contract for 200 vehicles, and one workless day would be canceled.
The material was prepared with the participation of Liudmila Treystman and Pavel Mikhno