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Evgeny Luzov,Country Manager ALCOA RUSSIA
April, 2008Moscow
The 9th Annual AmCham Investment Conference
Innovative Development of the Russian Industry: Major Achievements & Challenges of Alcoa in Russia
2
• GDP Growth: av. 7% over the
last 5 yrs.
•Gold & Currency Reserves: in
excess of 511 billion USD (3rd in the
world)
•FDI: 47 billion USD in 2007 (2nd in
the world after China)
Positive Features of the Russian Economy:
The Innovative Direction of the Russian Economy
• Inflation: 11,9% in 2007; on a
rise in 2008
• Dependence on the raw
materials export: 67,7% of
Russian export is natural resources
• Low investment in the
R&D: 10% of all investment
(Europe: 50% of all investment)
• Decreasing population and
workforce
• Low productive efficiency
Negative Features of the Russian Economy:
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New Course in Diversifying the Russian
Economy:
• Presidential and Government Initiatives:
«Four Is: Infrastructure, Innovations, Investment, Institutes»
• Creation of the National Industrial Champions:
UAC, Rostechnologia, etc.
• Investment in infrastructure & public-private
partnerships
The Innovative Direction of the Russian Economy
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Each day there are 116,000 Alcoans, working in 450 communities, in 44 countries that will …
Alcoa today…
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Alcoa today…
• Mine 85,800 tons of bauxite and 27,300 tons of coal
• Refine 34,300 tons of alumina
• Produce 9,550 tons of aluminum
• Recycle 2,300 tons of aluminum
• Manufacture 8,810 tons of aluminum products
• Assemble harnesses for 20,400 vehicles
• Generate 96,000 MWH of electricity
• Purchase $27 million worth in goods and services
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•Investments
•High level industrial expertise
•Advanced technologies
•Best practice
•New markets
•Corporate values
On the way of innovation: ALCOA IN RUSSIA
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$ 290 mln.
$ 220 mln.
- 2005-2007
•Reconstruction & modernization
•New equipment and technologies
•Alcoa Business System (ABS: TPM, Kaizen)
•Improvement of product quality and production efficiency to global
standards
•Environment, Health and Safety System (EHS)
•Employee training and development of workforce potential
$ 257 mln. $ 767 mln.
On the way of innovation: Investment program
- INITIAL INVESTMENTS: acquisition of the Samara Metallurgical and Belaya Kalitva plants
- 2008
The share of Samara Plant in the mill
domestic market is nearly 40%
The share of Belaya Kalitva Plant in the
mill domestic market is nearly 10%
50% aluminum market of Russia
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2005 2007
Investment program: Results
On the way of innovation
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The Largest Forging Press in the World
On the way of innovation
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The Largest Extrusion Press in the World
On the way of innovation
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Large 5-Stand Rolling Mill
On the way of innovation
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Belaya Kalitva - Aerospace Plate Furnace
On the way of innovation
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BK - Ebner Plate Furnace Entrance(first furnace survey 2007)
On the way of innovation
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1620
24
32
0
10
20
30
40
2005 ACT 2006 ACT 2007 ACT 2008 PLAN
+28%
+54%
+100%
On the way of innovation: Production Efficiency (tons per head)
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Regional airliner Sukhoi Superjet 100; SSJ100 will be produced by
Russian aerospace firm Sukhoi’s Civil Division in cooperation with 30
world leading subcontractors, including Alcoa
Advanced alloys
On the way of innovation: The example of SSJ
Advanced technologies, incl.Signature Stress Relief (technology of residual stress reduction)
Upgraded equipment: unique technical features of the 75.000 hydraulic forgings press
Applications with no analogies in
the world – forgings with 10 square meters
surface
•Reducing hundreds of kilograms’ weight
•Reducing the costs of assembly and assembly tools
•Increasing strength and reliability of aircrafts
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• Technical & administrative barriers
• Need to unify the technological
standards
• New alloys certification procedures
The example of SSJ: Major Challenges
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On the way of innovation: New technologies
Certification audits
Next steps: Boeing and Aerobus certifications
75.000 Press Renovation
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On the way of innovation: The example of Body, Tabs and Ends Can
26 300
44 000
65 000
80 000
90 000
100 000
15 000
30 000
2 0000
10 000
20 000
30 000
40 000
50 000
60 000
70 000
80 000
90 000
100 000
110 000
2005 2006 2007 2008 2009 2010
Can Stock End and Tab
• Reconstruction of Furnace No.21 in Samara: high-quality ingot production for can stock (energy efficiency with the regenerative burners saves about 40% of the energy needs)
•New Coil Coating Line: drastically expand the range of rolled coil products, including coils for can tabs and ends
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• Tolling schemes
• Administrative barriers in the regions of
operations
• Expansion of the customer base is a
positive development: new can makers
entering Russia
• More favorable trade and customs
regime is necessary
The example of Body, Tabs & Ends Cans: Major Challenges
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0.00 0.00 0.00 0.00 0.00 0.00 0.00
0.760.58 0.64
0.310.00 0.00 0.00 0.00 0.00 0.00 0.00
0.250.05 0.16
0.00
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Alcoa of Russia TRR
Alcoa of Russia LWD
Alcoa TRR
Alcoa LWD
Count
5
0
March 24* As of
On the way of innovation: EHS
EHS
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On the way of innovation: Workforce Potential
Employee Training and Development Program
2007:
•Training and developing budget - $900.000 ($93 for an employee)
• 9 587 employees: in-service and out-service trainings
•More that 400.000 class hours
Development ofWorkforce Potential
Alcoa Foundation Technical Education Support Program:
•Three leading universities – Samara State Aerospace University (SGAU), Donskoy State Technical University (DGTU) in Rostov-on-Don and Moscow Steel and Alloy Institute (MISiS)
•119 scholarships for students at engineering faculties, 13 development stipends for young faculty members
•Donations of laboratory and lecture equipment to SGAU and DGTU
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• Innovations are more than just investment
into the equipment & facilities. Human
capital investment drives innovation.
• The Russian Government’s agenda matches
the business interests.
• National regime to foreign investors should
be more than a WTO requirement.
Innovative Development of the Russian Industry: Critical Considerations
23
AAOn the way of innovation
Questions?
