L. Simonelli: «I would like to understand how the company can expand its activities in Russia»
In the end of 2009 GE launched the production of Evolution locomotives at the recently built locomotives' assembly and service factory in Astana (Kazakhstan). In an exclusive interview to "RZD-Partner" magazine Lorenzo Simonelli, CEO & President of GE Transportation outlines GE's expansion plans in the "1520 area".
- Mr. Simonelli, can the locomotives' plant project in Kazakhstan be considered as accomplished?
- First of all it is important to understand that the project in Kazakhstan is a part of partnership that lasts for several years. The partnership is aimed at upgrading national locomotives' fleet and creating a facility to assemble GE locomotives locally. In December 2009 the first manufactured locomotive within our JV with local partner was was introducedat the plant. Now I can say that the project is successful. In terms of technology our plant in Kazakhstan is the most advanced. Our partners have already appreciated the benefits of the locomotives' modernization due to fuel economy, pollution level reduction and increased locomotives' reliability and functionality. We are looking forward to further developing the partnership with our Kazakh colleagues.
- Who will purchase the locomotives produced in Kazakhstan? It is said that "Gazpromtrans" has placed an order for 20 locomotives assembled in Astana. Have there been any orders from other private companies?
- These locomotives are produced primarily for the Kazakhstan's own needs. But it is also possible to supply them to other regions having 1520 mm track width. For such cases our model can be upgraded according to the client's country requirements.
The production capacity of the Astana plant is about 250 locomotives. Now we are going through negotiations with potential clients, yet we're not ready to disclose their names.
- You have experience in cooperating with "Railroads of Yakutiya". How do modernized GE locomotives operate in tough Siberian climate conditions?
- We were selected as partners for upgrading the Yakutian railway system based on our locomotives' performance capabilities to work in such specific conditions. We're very satisfied with the results in Yakutiya in terms of operation and reliability indices. Our partners see locomotives' great benefits in fuel conservation. Moreover, one GE locomotive can substitute three sections of the previous type ones.
- Russian railroad infrastructure is able to operate with trains consisting of 71 nominal cars, and Evolution locomotives are designed for only 60...
- We're considering to increase the potential cars' amount in correspondence with our clients' needs. Also we're looking for ways to use distributed power, which will provide us with additional capabilities to transport large cargo volumes.
- GE's energy equipment produced 70 years ago still successfully works on different Russian power plants. How long will Evolution locomotives last? If we compare Russian locomotives' lifetime costs with that of Evolution locomotives, what will we have?
- An ordinary locomotive's lifetime is close to the lifetime of a power plant. So there are no reasons to think that our locomotives will be in operation less then their predecessors. In terms of lifetime cost I think it's too complicated to compare these two generations. Due to modern technologies used in Evolution locomotives, our clients receive a full range of benefits. The major part of railroad operation expenses falls on fuel. Our locomotives consume 10% less fuel and provide fast return on investments. Additionally, the use of GE locomotives allows to reduce environment pollution by 40%. We're continuing to invest in technology development. Each year our company spends $200 million on R&D, including new diesel engines development.
- In Russia you have a lot of competitors that produce not as technologically advanced, but less expensive products. Have you considered setting up joint ventures with Russian companies?
- The company is open to various types of partnership and considers it, where it makes sense, but I should say we are not direct competitors to locomotives' manufacturers with low price offerings. Our locomotive's initial price is high, but these expenses are quickly compensated.
The roots of GE's partnership with Russia go way back into history. We have always been searching for ways to introduce our new solutions for the Russian railroads. The company is still highly interested in the local market and we look forward to continuing our operations here.
- Are you ready to localize locomotives' manufacturing in Russia? Can you evaluate the possibility?
- We're considering this possibility in long term prospective. We have launched the locomotives' localization in Kazakhstan. Naturally there are other elements that could be localized, engines for example. Some technologies will be transferred to our Kazakhstan partners during the next five years. I can't specify what type of technologies as it is commercially confidential, but there's nothing we cannot localize. If a market demands it, we're ready to localize it. At the moment GE has already implemented a number of local projects: we've signed agreements with Russian partners to produce medical equipment and gas turbines. We are also involved and in the construction of the Energy Technology Center in Kaluga region.
- A few years ago there were publications about RZhD and GE's possible joint venture for 2TE10 locomotives' modernization. What is the status of those plans?
- It was 5 years ago, before I joined GE. Our relationship with RZhD is positive enough. I think that this partnership is sooner or later possible.
- What's the purpose of your visit to Russia, if it's not a secret?
- This region is very important to us. We think that Russia is stepping out of recession and starting to recover, I would like to understand how the company can expand its activities here.
- Has the global crisis affected your company's plans?
- I don't think that the market situation is able to somehow affect GE's plans. The plans are made for a long period and include investing in innovative technologies and working on all the world's major industrial markets. In 2009 there was only one region - North America -- where we observed a 50% drop in demand for our products.
We expect 2010 to be more steady. Particularly in the CIS region we see a lot of opportunities for growth. This year we plan to produce 60 locomotives in Kazakhstan. We have positioned the company to return to its pre-crisis operation level by 2011-2012.
Sergey Zverev