The fight for control over the Saturn Research & Production Association, Russia's best engine building company, has ended in a victory for government officials.. Prime Minister Vladimir Putin personally arrived at Rybinsk to nationalise the company.
The economic crisis forced Yuri Lastochkin, Saturn's head and main shareholder, to capitulate to the state. "Many of our colleagues have suffered from the narrowing market and a sharp drop in solvent demand," Lastochkin said in late October. Saturn had to repay a bond loan of 3.5 billion roubles ($125.85 million) by the end of this year. It failed to get another loan from its partner, the Swiss UBS bank, and asked Vnesheconombank (VEB) to help. Saturn, the leader in Russian engine building with a portfolio of orders in excess of $500 million, would have seemed to be the best candidate for a state loan, but state banks nonetheless refused to issue a loan to Lastochkin. The thing is that Sergey Chemezov, head of the Russian Technologies Corporation, had long had his sights set on Saturn. In April 2008, the United Industrial Corporation Oboronprom, a subsidiary of Russian Technologies, began establishing the United Engine Building Corporation (UEC) under decree of then-President Vladimir Putin. The failing enterprises of the Samara and Perm groups were immediately incorporated into the UEC, for the state already controlled them. The Saturn management alone, Yuri Lastochkin in particular, was decisively against the company's entry into the UEC under the pretext that they had already set up their own engine building holding together with the Ufa Engine Building Production Association (UMPO). The Rybinsk and Ufa companies have accumulated the bulk of the sector's innovation potential. The Saturn portfolio contains the new model of the SaM-146 civil aircraft engine for the Sukhoi Superjet 100, a modern Russian medium-range jet (the engine will be launched into serial production soon), a number of power units for the Navy and operational flight trainers, the so-called 117C product, a prototype of a new engine for fifth-generation fighter aircraft, and various civil aircraft products, including engines for gas-pumping units and terrestrial generators. UMPO is a serial producer of aircraft engines for the SU planes. The Ufa plant's export portfolio alone is assessed at $1.3 billion.
At first, Oboronprom held a 37% stake in Saturn, with Saturn's director general and managers keeping about 57% of the company's shares. Oboronprom tried to persuade Lastochkin to sell a 13% plus one share stake in his company, so that Oboronprom could increase its stake in Saturn to a controlling one. To quote Andrey Reus, Oboronprom's director general, Lastochkin's "reaction to this proposal was also destructive." It was impossible to implement the presidential decree without administrative interference. In late September, the Federal Financial Markets Service (FFMS) suspended the implementation of Saturn's plan to issue seven-year bonds worth 3.5 billion roubles. The company needed this very sum for bond redemption at the end of the year. In October, the investigations directorate at the interior ministry's department for the Yaroslavl Region filed criminal charges against "two unidentified persons" working at Saturn. When Saturn went to VEB for state help, the bank's management promised a loan on the condition that Saturn sell 13% of the company's shares to Oboronprom. Saturn managers were ready to sell the company's gas turbine business, Saturn Gas Turbines, to Gazprom's subsidiaries, but the talks ended in failure. In this situation, the Oboronprom management holding 37% of Saturn's shares did not press for assistance to Saturn, expecting its leadership's capitulation. It finally took place. Putin's visit to the Saturn plant in Rybinsk on December 2 started with an excursion around the plant conducted by Lastochkin and ended with a press conference at which Putin said that the Saturn management had "pursued an unjustifiably risky financial policy" and that Oboronprom would buy out all shares held by Saturn managers at market prices (the sum was not specified). At the first stage, Oboronprom will buy 49% of Saturn and 58% of UMPO shares from individual shareholders, thus bringing its stake in these companies to 86% and 80%, respectively. Next year, the government will launch an additional share issue of Saturn worth 3 billion roubles that is also expected to be bought out by Oboronprom. In return, VTB will grant a 10 billion rouble loan to Saturn. According to the Prime Minister, the government will also prepare a package of additional measures to support Saturn. "The government will ensure purchases of Saturn's products by its key clients, i.e., the Defence Ministry, air carriers, the United Aircraft Corporation, energy companies, and Gazprom," Putin explained. He promised that Lastochkin and his team would remain at Saturn's helm, for they had proved their worth "as skilled managers."