On October 16-18, the III International Rail Expo exhibition was held at the Central Railway Station in Kyiv, within the framework of which the products of the car-building and car-repair enterprises of Ukraine, China and France were exhibited. The organizers of the exhibition established the Ukrainian Rail Awards, in which of 5 finalists, the “Project of the Year 2019”, which has had the greatest impact on the Ukrainian railway industry this year, according to the results of an open vote, was the new Aurum Group car repair depot, set up at the facilities of the Diesel Plant in Kryvyi Rih. We met with Alona Lebedieva, the owner of the Industrial and Investment Holding “Aurum Group”, which now includes two car repair depots - Agregatbud and Diesel Plant.
Question: Why was the decision taken to open a car repair depot?
Answer: In the structure of Aurum Group, there are railway freight transport companies-operators, which currently own about 700 freight cars. All our cars were built at the facilities of the Diesel Plant in 2009-2019, nevertheless, they need regular repairs, according to the regulations of UZ. That is, the first thing is the internal request of the group’s enterprises. Secondly, the fleet of freight cars in Ukraine over the past 3 years has increased by 11%, more than 20,000 cars that will also need repairing. That is, with the increase in the fleet, the volume of car repair works also grows, which is also facilitated by the elderly age of cars. Therefore, today 69.6% of UZ freight rolling stock has an expired service life and the private one has 33.12% of the share of such cars.
Question: From now on, will the car-building Diesel Plant of Aurum Group not only build cars but also start providing repair services for them?
Answer: “Yes, absolutely right.” Just in September, we received the right to carry out depot and overhaul repairs of gondola cars, grain carriers and cement trucks, platforms, as well as uncoupled repairs of TO-2 volume. This is the second depot in our group but the first in Kryvyi Rih. Our task is to strengthen the position of the Diesel Plant in the Ukrainian market by providing customers with high quality and prompt repair. We also plan to expand preferences for customers by providing all the necessary range of services that every owner of a private rolling stock needs. For example, we offer leasing programs for the purchase of cars for customers of gondola cars and grain carriers, our operator companies take cars for rental management, which guarantees customers a regular income, and now we can provide car repair services in an excellent location.
Question: Speaking of location, why did you decide to place the new depot at the Diesel Plant?
Answer: This is a convenient location primarily for car fleet owners. The Diesel Plant is located in the city of Kryvyi Rih, it is the leading region in Ukraine in terms of loading volume of iron ore raw materials, coal, building materials, the main logistics routes of the railway pass through here. Kryvyi Rih Directorate of UZ alone is ahead of three largest directorates combined - Dniprovska, Poltavska and Zaporizka - in terms of loading volumes. At the enterprises of Kryvyi Rih Railway Directorate, a quarter of all cargo in Ukraine is loaded! That is, it is here that most of the country’s freight fleet is constantly located. Therefore, the location of a private depot here will allow owners of rolling stock with the minimal distraction of cars from work to carry out both their scheduled and unscheduled repair work.
Question: Are you planning to compete with JSC Ukrzaliznytsia?
Answer: “It is the state company’s monopoly in the car repair market of Ukraine that has practically brought the industry to a deadlock, and with the increase in the number of private car repair depots, healthy competition will finally appear in the market, which will certainly stimulate its development.
Today, the car repair facilities of UZ allow the state-owned enterprise to repair both the cars of its own (inventory) fleet and of private owners. However, the lack of investment in the modernization of infrastructure facilities, production facilities of UZ led to systemic issues of car repair depots, among them: staff shortage, lack of spare parts needed for repairs, the unpredictability of repair work schedule and so on. It is today that the number of repairs carried out at UZ facilities has begun to decline in favour of private depots. If in 2017 64% of the country’s freight fleet was repaired in an UZ depot, and only 36% in private and leased depots, in 2018 - 60% and 40%, then for 7 months of the current year the figures have been 54% and 46%, respectively, while there are 35 depots in the structure of UZ, and only 9 private and leased ones.
Question: The car fleet of UZ is completely exhausted. If the procedure for extending the service life of the car is not cancelled, the repair depots of UZ will be fully loaded with work for a long time to come. Unfortunately, the private fleet is steadily replenished with old cars, which increases the number of requests for repairs, what volumes do you expect?
Answer: Yes, unfortunately, the UZ car fleet is completely exhausted and the operating costs for its maintenance are growing every year. Therefore, this problem - like a coin, has two sides, on the one hand, the presence of an outdated fleet provides car repair depots with work, and on the other hand, the increase in the outdated fleet of cars increases the costs of UZ for its operation, which creates conditions for inefficient management of state property. However, the worst thing is that the rail car manufacturing plants of Ukraine are being destroyed, the ones that do not receive orders, which is why the state budget is losing hundreds of millions of hryvnias, related industries are sustaining losses and thousands of people are losing their jobs and emigrating.
We, as a diversified holding, which includes both car building and car repair facilities, have repeatedly drawn the attention of the relevant ministry, the Prime Minister and asked to eliminate its main cause - namely, to prohibit the procedure for extending the service life of cars, which was once introduced as a stopgap measure. Its goal was to eliminate the acute shortage of freight cars. It fulfilled its task and the shortage was eliminated by importing written off abroad cars. Over the past year, more than 4,000 cars with an expired service life were imported from Russia to Ukraine, and this year, before the Cabinet of Ministers adopted a resolution to ban the import into Ukraine from November 20, 2019, about 4,200 units had been imported. For an understanding: 4,000 cars - this is 36% of the total number of new cars built in 2018 by all car-building plants of Ukraine.
Owing to the procedure for extending the service life of a car, outdated cars receive a second life and run on the railway of our country even up to a double statutory operating period. That is, if according to the design regulatory documents, the life of a gondola car is 22 years, it can work for a double period, that is, 44 years. Moreover, there are 46.44% of such cars in the structure of the entire fleet of freight cars in Ukraine.
As for volumes, taking into account all today’s realities, we plan to carry out about 2,000 scheduled repairs of private cars at the Diesel Plant and Agregatbud during the next year. As for now, we have already made arrangements to create a wheel-roller shop on the basis of the Diesel Plant, which we hope will allow us to significantly increase the volume of car repair in the future.
Question: Car repair market participants often complain that there are no spare parts in the UZ depot, how have you solved this issue?
Answer: I will repeat myself, it is with an increase in the number of private depots that the country’s car repair market is restructured, the competition will increase, and accordingly, the requirements for the quality and repair work schedule will rise.
Our goal is to repair it once, but on a high-quality level, so that the car does not stop for temporary repairs later, as it is economically impractical, although many depots practise it for the sake of low cost. Quality and low prices together are not compatible categories. In addition, a private depot, unlike a state one, cannot afford such luxury as repairing “on a formal basis” because it values its license, the receipt of which is a difficult process and no one has the desire to lose it. The UZ depot, audited directly by UZ, has a broader “freedom of action” in terms of quality.
As for spare parts, among the main competitive advantages of the depot at the Diesel Plant is exactly the availability of working capital of the necessary spare parts, which can significantly reduce the time for repair work. We have created an effective procurement system; moreover, we have already established and are manufacturing a large range of small and medium casting spare parts, using the group’s production facilities.