Heavy Manufacturing

In Russia, the common term for heavy manufacturing is “machine building” (machinostroenie). It includes production of motors, boilers, tractors, agricultural and mining combines, industrial machines, manufacturing equipment, and their components. It also includes the manufacturing of some high-tech goods (e.g., electronic equipment, avionics and robots); some of these are discussed in Chapter 21. It includes some components of the military complex as well, such as construction of tanks, airplanes, and submarines, and their civilian counterparts (cars, trucks, passenger jets, and ships). Russia inherited about three-quarters of the Soviet Union's heavy industrial plants. Heavy manufacturing was the main priority of the Stalinist economy, because it was viewed as the primary source of the state's might, and a guarantee of its survival in a hostile world. About one-third of all industry in the late Soviet period was heavy manufacturing, especially military types. In relative terms, Russia had more of the heavy industries and other republics had more of the light industries. Two other republics that had major military machinery production were Ukraine and Belarus. Some heavy industrial production took place in Kazakhstan (mining and farm equipment) and the Baltic states (electronics and transportation), but very little was produced in the other four Central Asian republics, Moldova, or the Caucasus.

Amounts of Some Types of Machinery Produced in Russia in the Late Soviet Period and the Post-S oviet Period

Much of the equipment used in heavy industry during the late Soviet period is still in use today, but is very old. Already in the early 1990s, the average lifespan of the equipment was approaching a quarter century; by 2006, 45% of the equipment used in manufacturing was over 20 years old. The overall output level of this sector fell by 50% in the first 5 years of reforms. Table 18.1 provides statistics for some specific types of machinery. Although the situation is slowly improving, even by 2008 Russia's heavy manufacturing output was only 85% of the 1990 level. However, the entire sector went through a major reorganization: While production of some items ceased or greatly declined, production of new items began. For example, the Soviet Union made over half a million heavy trucks per year, but it made no light pickups or vans. Now over 20 modifications of the Gazel van and the Sable pickup truck are produced by the GAZ plant in Nizhniy Novgorod (about 100,000 vehicles per year). The Soviet Union also did not build any railroad passenger cars, importing them from East Germany. Now at least two factories are making those domestically in Tver and Tikhvin. Machinery building is the most complex of all industries. It requires coordination of production and a huge supply of parts. It is also heavily dependent on the availability of raw materials: energy; water; steel, aluminum, copper, nickel, and dozens of other metals; glass; and plastics. The main concentration of machinery building is in the Central federal district around Moscow (about 39% by production volume), but some industries are also located along the Volga (22%) and in the Urals (14%). Outside Russia, a very important machinery-building region is south central Ukraine, along the Dnieper River (Dniepropetrovsk, Dneprodzerzhinsk, Zaporozhye). Virtually all machinery building for civilian purposes has been privatized in Russia now. As in the other industrial sectors, a few large companies predominate; they are, however, much smaller than the petroleum, gas, or metal producers in terms of market capitalization (i.e., their stocks tend to be undervalued). The largest company by market value in this sector in 2007 was AutoVAZ, the manufacturer of Lada cars in Togliatti (about $5 billion), which was in 36th place among all Russian companies. KAMAZ (a truck manufacturer) was in 46th place, while GAZ was in 54th. One of the reasons for these low rankings is the low competitiveness of Russian products in the world markets. AutoVAZ entered into a complex negotiation process with Renault–Nissan in 2009 to avoid full bankruptcy; the company is expected to cease its production of the obsolete Lada line and switch primarily to the Renault brand by 2012.

The manufacturing of the heaviest machinery and equipment is mainly concentrated in the Urals (Yekaterinburg, Orsk, Chelyabinsk). Uralmash is the largest producer of heavy machinery in the region, making mining equipment and other machines for steel and nonferrous metallurgy, energy, and construction companies. The region is optimally located in the middle of the country, with a large pool of qualified labor; well-developed transportation networks; and major deposits of coal, iron, and nonferrous ores nearby. Many large factories were relocated to the Urals during World War II from European Russia and stayed there after the war. Large mining combines are produced in Siberia, where they are most needed (Irkutsk, Krasnoyarsk). Historically, another large machinery-building center has been Leningrad (St. Petersburg) and its vicinity, with proximity to the European markets and easy sea access; it is known for building ships, tractors, steam and hydraulic turbines, and nuclear reactors. Dnepropetrovsk in Ukraine is home to the large Yuzhny machinery plant, building aerospace equipment and more recently a wide array of consumer goods (e.g., bicycles and gym equipment).

Railroad car and engine building is an important branch of heavy industry in Russia, with its continued heavy use of railroads in shipping freight (40% by volume) and in passenger traffic (33%). Large diesel locomotives are built in Kolomna near Moscow. Novocherkassk in the northern Caucasus builds electrical locomotives. Although Russia holds the world record for the most powerful, fastest diesel-driven locomotives, only two ER-200 high-speed trains were built in Russia, and they were about only half as fast as a typical French TGV train. After the collapse of the socialist bloc in Europe and the loss of Ukraine, railroad cars also had to be built in Russia. Today freight train cars are built primarily in the European part of the country (Bryansk, Tver, St. Petersburg, Kaliningrad) and in the Urals (Nizhniy Tagil). Specialized subway trains and suburban commuter trains are built in a few cities around Moscow. Incidentally, the Nizhniy Tagil railroad car plant is also famous for designing and building the most massively produced Soviet tank (T-72), as well as the modern tank of the Russian Army (T-90), hundreds of which have been sold to India, Algeria, and other foreign countries. The T-90 still forms the backbone of the Russian tank force.

Ship building is another area where the Soviet Union had a great need for imports. Many cruise ships still working on Russian rivers were German-built. However, Russia still continues to build some of its own ships, unlike the United States, which ceased virtually all civilian ship building after World War II. About one-third of all ships in the world today are built in South Korea, with Japan, China, and Germany following suit. Compared to these giants, Russia's production is very small. Naturally, ocean-going ships are built near the sea (St. Petersburg, Vyborg, Severodvinsk, Astrakhan, Vladivostok), as are shelf drilling platforms and floating fish-processing facilities. Vessels for use on rivers are built along the Volga (Nizhniy Novgorod, Volgograd) and in some other areas (Blagoveshchensk on the Amur, Tyumen and Tobolsk in the Ob basin, etc.). The U.S.S.R. had well-developed river transport that included passenger commuter boats, hydrofoils, and cruise ships, as well as barges, tankers, and freighters. The Soviet Union also had a heavy presence on the world's seas, and its tankers, dry cargo ships, fishing boats, and icebreakers were all produced domestically.

Because the aerospace industry requires access to plenty of aluminum and energy, virtually all of it has been concentrated along the Volga, with its numerous dams near Kazan, Samara, Saratov, and Ulyanovsk. The region also has great research facilities, a highly skilled workforce, and a decent quality of life. Additional R&D for the industry occurs in Central Russia, with easy access to Moscow institutes and project bureaus (Korolev and Zelenograd). Some facilities for missile construction and testing are in Omsk and Krasnoyarsk.

The Soviet Union was making hundreds of large passenger jets per year in the 1970s (the most commonly known were the Il-62, Il-86, Tu-134, Tu-154, and Yak-42 models). There were also a few reliable turboprop models (the An-2, An-12, and An-24) for shorter flights. Several were of excellent design and quality. For example, the Il-62, production of which began in 1962, was one of the most reliable long-distance planes ever built. It was able to cross the Atlantic Ocean from Moscow to New York without needing to refuel. By contrast, many late Soviet planes had unsurpassed aerodynamics, but noisy and thirsty engines. Perhaps the best example is the Il-96, one of which is still used as Russia's “Air Force One” to transport the president. It has a very smooth ride; however, its four engines use about twice as much fuel as their Western counterparts per kilometer of flight. Avionics were
also lacking in quality.

During the Yeltsin period, production of passenger airplanes came to a halt, and production of military jets was greatly curtailed. One large plane manufacturer (Antonov) was left in Ukraine. Three others (Ilyushin, Tupolev, and Yakovlev) were struggling to continue production in Russia without adequate supplies or finances. The inability to sustain production during the reforms led to the virtual disappearance of modern Russian jets from the world's travel markets. Domestic airlines started switching to Airbus and Boeing models. To rectify the situation, Putin's government merged all existing plane producers into one consortium in 2006 and provided new tax breaks and subsidies. Soviet fighter jets (the MIG and the Su-series) remain competitive on the world markets in flight performance, but generally lag behind U.S. and European models in pilot comfort and high-tech equipment. A few dozen of these fighters are still built per year and are significantly cheaper than American or French models. The Sukhoi Corporation also started making a civilian regional jet (the Superjet-100) in 2008, when prodded by the Kremlin. Primarily made out of foreign parts and not much different from the mass-produced Brazilian Embraer, it is nevertheless a source of much national pride.

Car and truck manufacturing is similarly concentrated in the middle Volga basin. Like the aviation industry, it was heavily militarized in the Soviet period. For example, UAZ and GAZ all-terrain four-wheel drive vehicles were used both by the military (like Humvees) and by civilians working in forestry, law enforcement, geology, and the like. GAZ also builds heavy-wheeled BTRs (armored personnel carriers) at its Arzamas plant in Nizhniy Novgorod Oblast. Many of the factories producing tanks or armored personnel carriers also make tractors or agricultural machinery. Trucks are mainly built by GAZ in Nizhniy Novgorod and KAMAZ in Naberezhnye Chelny. The historical ZIL plant in Moscow made hundreds of thousands of heavy trucks, and some limo cars for the Communist VIPs, but is now closed. Many of the long-distance trucks as well as the buses used in Russia today are imported, mainly from Europe (Volvo, Mercedes, etc.).

The biggest recent changes have occurred in the passenger car industry. The two giants of the Soviet period (AutoVAZ in Togliatti, making Ladas and Nivas, and GAZ in Nizhniy Novgorod, making Volgas) continue production as large private enterprises. Many new models have been introduced, some almost approaching Western standards of comfort … of about 20 years ago. The Moskvitch plant in Moscow did not survive Yeltsin's reforms and closed its doors indefinitely. However, the real revolution occurred when production of Western cars was allowed inside Russia. Although most of these factories assemble autos from parts manufactured outside Russia, their sheer presence makes Russian manufacturers try harder, while customers benefit from many more choices. Employment for Russian workers is also a benefit. Foreign brands produced in Russia include Hyundai in Taganrog, Kia in Kaliningrad Oblast and Izhevsk, Ford in Vsevolozhsk near St. Petersburg, and a few others. GM, Toyota, Nissan, and Volkswagen either have limited production in Russia already or are planning to establish it in the near future. Another significant player is Sollers, a daughter enterprise of the steel-making giant Severstal, which now produces both foreign (Fiat, SsangYong, Isuzu) and Russian (UAZ) brands of cars and trucks.

In the Soviet period, most agricultural machinery was built in the breadbasket of the country— that is, in Ukraine (Kharkov), northern Kazakhstan (Pavlodar), Moldavia/Moldova (Kishinev), and Belorussia/Belarus (Minsk). Manufacturers in many of these republics depended on Russia and each other for parts, and with the breakup of the U.S.S.R. and the beginning of reforms, entered a deep crisis. Within Russia today, Rostovon- Don and Taganrog, located near grain-rich Kuban, build giant combines (Rostselmash). Ryazan produces potato harvesters. The famous large Kirovets tractors were assembled in Leningrad, but today the plant produces mostly smaller machines for private farms. Incidentally, the same plant developed and produced hundreds of the late Soviet T-80 tanks. Volgograd, Lipetsk, Chelyabinsk, and Rubtsovsk produce tractors as well. Kurgan in the southern Urals produces armored personnel carriers (BMPs), thousands of which have been sold worldwide. Both John Deere and Caterpillar are present in Russia. Since 2000, Caterpillar has been making parts in its brand-new factory in Tosno near St. Petersburg; this is an attractive location because of easy connections with Western Europe and the presence of a highly qualified workforce. Their long-range plans involve building actual assembly lines for various types of tractors in Russia. A John Deere factory is present in the agricultural Orenburg area of Russia, where seeding equipment is assembled.