Visits within Russia

30 march, 2009 16:01

Prime Minister Vladimir Putin, who is touring the Volga Federal District, visited the AvtoVAZ automaker in Togliatti, where he met with the company’s workers

Transcript of the meeting: 

Vladimir Putin: Good afternoon,

As you know, we are going to hold a large meeting on our automotive industry today, the measures we have outlined to support the industry and you, the workers of the automotive industry, including AvtoVAZ. We will possibly discuss support for AvtoVAZ as a priority because it has the largest number of workers in the industry, 103,700, as I have been told.

It is the country's largest enterprise and also one of the largest in Europe by the number of personnel and the number of cars it manufactures. Last year, you made a record number, more than 800,000 cars. Unfortunately, we have not sold all of them because of the economic downturn late last year, which explains your difficulties. This is why we will analyse problems today and try to find solutions to them.

I have several kinds of news, both good and bad ones. Which ones do you want to hear first? The bad ones? Good. The bad news is that the global economic indices - and we directly depend on the global economy - are not good. There are small and uncertain signs of positive change, but on the whole, the global economy is still stagnating. The financial and economic crises have not ended. So far, nobody can tell when the crisis will reach the bottom, the lowest level from which we can expect the economy to start rising.

This is probably the main news for all sectors of the global and Russian economies, and also for your branch, auto making, because it is connected with suppliers. But most importantly, it is connected with the ability to sell you products, with the markets. And the markets have taken a plunge, in the world as well as in Russia. This is the main factor that worries us.

Now to the good news. They comprise the measures we have taken, are taking and will continue to take to support the demand and production.

What measures am I referring to? I will begin with the general measures, not only regarding the country as a whole but mainly regarding the Samara Region. We have decided to allocate 700 million roubles to maintain employment. The Government of the Samara Region will also allocate some funds. A total of 300 million roubles will be allocated for the development of small and medium-sized businesses. 103,000 people work a the head plant of AvtoVAZ, and over 200,000 people work for small and medium-sized companies that are connected with your firm. Therefore, these allocations to small and medium-sized businesses should have a positive effect also on AvtoVAZ.

There is still more good news. The conference today will be attended by the heads of a number of ministries and departments, who will report on the dates for the tenders to buy different classes of vehicles for government needs, including from your company. In all, we have approved the allocation of an additional 12.5 billion roubles for these purposes, and now we will discuss reasons for procrastination. The tenders will be held now, which means that part of your output will be sold.

We have also allocated 20 billion roubles from the federal budget and expect to attract 10 billion roubles from the regional budgets for the acquisition of automobiles for the regional and municipal authorities, including the Interior Ministry, healthcare, municipal authorities, etc.

I believe your contribution will be considerable. The 20 billion roubles from the federal budget and 10 billion from the regional budgets, 30 billion roubles in all, is sufficient to keep up the demand. This concerns all companies. And this is not all.

Some support measures have been drafted specifically for VAZ. Today we will discuss and approve the amount of allocations to VAZ so that it will be able to settle all its debts, including to suppliers.

We will consider the allocation of billions of roubles, including over 20 billion to VAZ. I know that all of you, including engineers and workers, worry if the company will be able to start producing new family cars. I think that this is possible provided we implement all the decisions I have mentioned here. I have no doubts that these decisions can be implemented. The only question concerns the deadlines. We must do it quickly; today we must approve the final parameters, and do it quickly. And then VAZ will be able to attract loan resources on its own, and considerably larger resources, more than 90 billion roubles, in order to start producing a new family of cars. In this case, the plans for 2011-2012 and subsequent years will become quite feasible.

This is all I wanted to say. And now I will answer your questions.

Irina Gusarova, chair of the Trade Union Committee on Technical Services: What can you say about the wave of negative information reported about our plant and its output? The national newspapers, radio stations and television channels all seem to want to hit us as painfully as possible, even tough, as you have just said, last year we sold a record number of cars. We sold more cars than anyone else. And then, the quality-to-price ratio is acceptable for the people who are not very well off. Why the criticism then?

Vladimir Putin: I definitely have a negative attitude to such campaigns. If I didn't, I would not have come here today. Of course, the company has its problems, like any other company in the real economy sector, including the auto industry. Don't our automakers in other cities have problems? They do, and quite a lot. But unlike them, the AvtoVAZ management did not approve mass layoffs, which is a major achievement.

I know about your problems. I know that many of you are now working a shorter day. But still, your managers have found a scheme that allowed them to avoid major layoffs. This is very important. And this has not affected quality, and ensured sales as much as they could.

I have analysed data for other countries' automotive sectors today. I think production has plunged 35% in Japan and approximately 30% in Europe and the United States. General Motors has fired 34,000 people.

Now to the quality-to-price ratio. Of course, your company is working in the conditions that developed over the previous decades, and therefore I accept your question as you formulated it. Maybe we should have paid more attention to technical retooling. But we know what was happening in the country, including Togliatti, in the 1990s, we know everything about owners and their criminal dealings around AvtoVAZ. It took us some time to improve the environment. This is why I am telling you now: I have a negative attitude to such campaigns, and I am sure your company has a bright future.

T. Kokoreva, a test driver: You said major allocations had been approved to support the automotive industry. Will you finance our plant to give us an opportunity to produce new cars. You must admit that our cars are the best on our roads.

Vladimir Putin: Right. Of course, you must ensure quality and produce new models.

I have said here that to be able to attract new resources for the production of new cars you should settle your financial problems, the payables, which exceed 40 billion roubles. I think they amount to 43-44 billion.

This is exactly why we have come here, to decide how much to allocate to AvtoVAZ in direct injections. I will not bore you with technical terms. The point at issue is to allocate funds to the enterprise directly, and it doesn't matter in what way. What needs to be done to overcome the current situation? This will allow us to attract major funds for the creation of a new family of cars.

I have said that these will be major allocations, around 90 billion roubles. We will also consider the methods of supporting the enterprise while it attracts the money. I will not speak about state guarantees now. We are going to discuss the situation now so as to find ways to resolve problems. On the whole, this or other forms of state assistance are possible in the future.

Here is what I would like to highlight. VAZ has recently announced its decision to raise the prices of its products. They explain it by the fact that the exchange rate of the rouble against the main global currencies - the US dollar and the euro - has changed. This has increased the cost of imported components. What I am going to say now is very important: Changes in the rouble rate have dramatically increased your competitiveness now and in the medium term, for the next two to three years, I think. This is the time you will need to create a new line of cars.

How has your competitiveness increased? You don't have to be an expert to understand this. Suppose a foreign producer, your rival, is rolling off cars at $10,000 of prime cost. He brings them here at the old exchange rate and sells them at 250,000 roubles per car, right? But it costs 350,000 roubles at the new exchange rate, whereas your prices have not changed.

This is dramatically increasing your competitiveness. I repeat, the consequences of these measures will sustain for the next two or three years. During this time your enterprise should use the situation to advance to a new, higher level of quality.

A. Smirnov, metalworker: Mr Prime Minister, it is rumoured that the VAZ workers will be offered to take an extended forced leave. Can we expect stability at the plant after the Government provides assistance and ensures a market for our products?

Vladimir Putin: This is why we have come here. I think we will ensure this.

Smirnov, metalworker: So, there will be no forced leaves?

Vladimir Putin: The plant's management has taken measures to introduce a shorter working week, a shorter working day, etc. Everything they have done were tough measures. I see no reasons for even tougher measures. Otherwise it is not clear how they will use the support measures we will consider today. And they imply considerable support.

I am not going to put the cart before the horse now; I will announce our decisions after we discuss them at our meeting. But first I will need to listen to everyone, including the managers of enterprises and the heads of the industry, ministries and departments. Anyway, these will be considerable support measures. If your enterprise is doing relatively well without the measures we are going to discuss today, I hope that your work will be even more stable after we take our decisions.

Andrei Zakharov, chairman of the Trade Union Committee at Shop 48/5: I came to the plant when I was 20 years old. I am listening to you now and here is what I will say: Injections are a good measure, and support is great. Maybe you will place a state order at the plant, which will allow us to survive, although not at the past rate. I believe that we need a market for our products, for the products made in Russia, where Russians would be able to buy our cars. While we have been talking here, the price of our cars has grown by 10,000 roubles, but the wages of our workers have not grown. An ordinary Russian needs to work for at least six months, taking away from his family, to save 50,000-60,000 roubles. This slows down our sales.

Just look at what the banks are doing. Their hidden interest is 18%-20%. I have heard you speaking about easy loans for Russians for the purchase of cars made in Russia and sold at a certain price. Has this programme been launched? Can we go to a bank for such a loan?

Vladimir Putin: Yes, you can.

You have pinpointed the largest and most important problem, the problem of sales. You are absolutely right in that it cannot be solved exclusively with state orders and purchases, that this is only part of the solution...

Andrei Zakharov: ...and a very small part...

Vladimir Putin: Yes, it is only a small part of the solution. Therefore, the crucial task is to restore the demand for our products. As I have told your colleague, changes in the rouble rate against the main global currencies is a major boon for AvtoVAZ, the other Russian automobile manufacturers, and the national, industries in general, the plants working in Russia.

Of course, we should take different measures, and not only devalue the rouble, to ensure the demand. We should raise the living standards of the people and increase their real wages.

You have prepared well for this meeting, Andrei. I agree that banks' rates should be lowered. This is a multifaceted task. The Central Bank's refinance rate is 13%, and it is connected to inflation. The rate cannot be lower than inflation for a long time, or else the banking system will crumble. What can we do to lower inflation? It entails a package of measures.

I am not going to speak about them here, because it will take all night. The problem implies a package of measures to rehabilitate the economy, such as support for the banking system you have mentioned, an increase in productivity, renewal of the pool of our vehicles, a balance between the mass of money in the economy and the amount of products, because prices will grow if we inject the money but you do not produce goods.

We should consider the problem responsibly, in a balanced manner and highly precisely. And we must not expect immediate results.

I mentioned working as before. Last year you produced more than 800,000 cars, which, I believe, is more than in the Soviet period. It is a record number, peak production at your plant and also in the global and Russian economies.

But when the crisis began the demand was bound to fall. And it has fallen in the automotive industry, at all auto-making companies. However, the measures we have drafted will definitely facilitate the revival of production, even though it will not be as quick as we would like.

Voice: That's about the whole company, but what about the workers?

Vladimir Putin: You are right, it concerns the plant. Be that as it may, I see that the wages are shrinking. The monthly average approaches 17,000 roubles now, and it used to be 19,000. There is a problem with loan payments. As you know, in this situation, if you take out a loan you have to count only on yourself. Things have changed now with the crisis, and however tough bankers might be, it is in their own interests to reschedule loans. No one wants insolvent clients. We are helping banks by enhancing their liquidity-that is, the funds they can dispose of. We are constantly discussing the matter with bankers. We insist on a rescheduling programme for a number of consumer loans, housing, in particular. The Government is helping them. We have earmarked 60 billion roubles for the Mortgage Agency to attract clients to it, and the Agency should have a dialogue with bankers to have the payments rescheduled. A relevant programme is being launched.

There was a question about boosting the demand. Decisions have been made in this field, too, and a programme has been launched. It has occurred to me only now that I have not answered your question in full. The programme envisages subsidising two thirds of the Central Bank refinancing rate on private loans to purchase cars whose price does not exceed 350,000. Almost all your cars qualify. In fact, the programme was created with your company in mind. An executive order I have signed recently is a final formality for such loans, so the programme will start working quite soon. I think Avtovaz will feel it.

Some of your competitors are also adjusting to this Government decision. Ford, for example, has cut its car prices to 345,000 roubles from 360-370 thousand. The company has made the right decision to get into the niche and create competition. It is a load on you but an opportunity of choice for the Russian consumers. So it is not bad, on the whole.

Question: Mr Putin, which of our company's cars would you like to have?

Vladimir Putin: I have bought a Niva, and the papers will be ready soon.

Question: Mr Putin, this company has a big problem. People who have worked here for 20-40 years destroy their health by the time they retire. We have voluntary health insurance, and they go to hospital with their policies. Health service and medicine prices are skyrocketing. Why is that? People cannot afford surgery. We have very expensive health services here in Togliatti-why? Some people die while waiting for an operation. Many cancer patients cannot afford proper treatment after they sacrificed their best years to the company. Is anyone monitoring the situation?

Vladimir Putin: We will continue to support the company's efforts-but, as I have said, the company insists on passing social projects to municipal and regional jurisdiction so as to spend money on production alone.

Question: Will that help?

Vladimir Putin: I hope so.

Question: You mean it will help patients?

Vladimir Putin: I mean the company, not patients. We are taking responsibility for kindergartens, and we are ready to take sport facilities, too. Fitness means health, doesn't it?

Voice from place: Sure, it does.

Vladimir Putin: We are ready to take holiday hotels and some other social projects, too. I repeat once again-we start with allocations to preserve the quality of services. As for healthcare on the whole, it is much talked about. The minister has made many public addresses lately. I also think that prices for medical services are growing inadmissibly despite the change of the rouble rate because we are importing many medicines or their ingredients. Still, I do not think the price rises are well grounded.
There are several fields in which we should improve our work. The most important task is to streamline the mandatory health insurance system. We will make relevant allocations and develop our own pharmaceutical industry and health services.

As for cancer, there is a target programme which we keeping open. We are going to develop and promote it.

As for complicated and expensive surgery, we are increasing the number of state-paid operations-but clearly, Moscow, St Petersburg and other major cities cannot cope with the entire Russian population.

So, there is a programme for the construction of high tech health centres in Russian regions. Some of them are working already. We will implement this programme despite financial problems. It envisages cancer and heart treatment. Excellent specialists are being invited to those centres from the country's leading research institutes and hospitals. We will certainly implement the programme.

Question: Where is it?

Vladimir Putin: The programme is underway. Four or five centres around the country have already opened.

Question: Vladimir Petrov, Shop No. 45-2. Central television often aggressively advertises foreign car and other manufacturers. Can VGTRK increase its advertising time for Russian goods?

Vladimir Putin: It can-but only at manufacturers' expense.

Question: Really?

Vladimir Putin: Of course.

Question: What about the state?

Vladimir Putin: Who are Avtovaz holders? Rosoboronexport, Troika Dialog and Renault, and a part of shares freely circulate in the market, as far as I know. I think company managers and employees also have shares. There is no government presence in Avtovaz.

Question: But isn't VGTRK a government channel?

Vladimir Putin: It is.

Question: Why shouldn't the state support it?

Vladimir Putin: It also needs money and support. People from the channel also come to me for money, saying that they have cut their budget, the advertising market is collapsing, and they have to keep up broadcasting in towns with population smaller than 200,000, where television works at a loss, etc, etc. They have formidable financial problems, like everybody else. They must guarantee broadcasting in the entire country, and they are remunerated for advertising according to present-day standards and rates.

I would like to see Avtovaz advertised at federal expense-but just think of what it would be like. Manufacturers of steel, toys, and everything else will come to me tomorrow, saying that their commodities are just as essential. Then, we will no longer be able to afford to implement the development programme for mandatory health insurance which your colleague is concerned about. It is a pivotal problem, really. Or, let say, we will no longer be able to afford the development of the pension system, which is crucial. It is our duty to make it effective and reliable.

Social guarantees are the main duty of the state, especially in a crisis. That is what principle budget allocations are for. We have not cut such expenditures against last year's despite the fact that budget revenues are almost halved. On the contrary, we have even increased social allocations while shifting their priorities. Pride of place now belongs to social welfare, pensions, grants, and health and education expenditures.

As I said at the start of this talk, we are allocating 700 million roubles to the Samara Region to promote employment and 300 million to its small and medium-sized companies. We are taking the money from 30 billion extra allocations to the promotion of small and medium enterprise. We have never earmarked such large amounts: 43.7 billion roubles to support employment. The money I have mentioned is channeled to the Samara Region out of those allocations. We have redistributed expenditures and, on the whole, increased them a bit against last year's while revenues have been almost halved. Where are we to get the money? Out of the reserves stocked in the past years-but we cannot draw that much from them, however anxious we might be, for two reasons.

First, we will need those reserves for the years to come because we do not know how long the crisis will last in the world and our national economy. We need to be extremely careful, precise and reliable.

Second, we have inflation. We have talked about banks, rates and suchlike-but all such matters are linked with inflation. If our allocations exceed commodity production, snowballing inflation will eat up all our revenues to send down the demand for your and all other Russian production. Whatever you do in the economy has implications, so whatever we do should be balanced and well pondered.

Question: What about the Young Family Programme? You say it concerns only persons younger than 30.

Vladimir Putin: Here's the Governor-he said so to me.

Vladimir Artyakov, Samara regional Governor: Younger than 35, in fact.

Question: Why should the programme bypass couples in which one is 35 or older? Why not involve at least one of them, the younger?

Vladimir Putin: Because it will require more budget money.

Voice from place: I see-but young people do need help.

Vladimir Putin: You call people past fifty young?

Voice: No. I mean a husband of 35 and his 30-year-old wife. Why doesn't the programme apply to them? It should be changed. People marry later now. Very young girls used to get married before, but now most marry at 28, so they have small chance of benefitting from the programme.

Vladimir Putin: I agree, on the whole. I will talk with the Governor whether the regional budget can afford it.

Vladimir Artyakov: We have shifted the age qualification already.

Vladimir Putin: What is the ceiling now?

Vladimir Artyakov: We started with 28, then moved the deadline to 30...

Vladimir Putin: Some people get married even at 70, and it is their first marriage. Do they qualify as young families, I wonder?

I mean that a family is young when it has just emerged-but there is the spouses' age to take into account as well. We should discuss this issue.

Fitter E. Kim: I am the Youth Commission head. The local press-in particular, the newspaper Present-says budget allocations to the Young Family programme will be cut by 5%. Is that true? And if it is, does this country really need the cut?

Vladimir Putin: It does not concern the whole country-it is a regional decision. I repeat once again: the Governor has reassured me that the programme will go on. Certain amendments might be made. I don't know whether 5% is a big or small amount. What really matters is that the programme survives.

Kim: Another question. It is no secret that it is difficult for young professionals just out of university to find a job. Either experienced professionals are wanted or there are no jobs on offer at all. But if there is no job, how can one get experience? It's a vicious circle.

One might also join what economists know as "low-paid manpower". Either you get token wages, allegedly with career prospects, or you get decent office employment on probation for, say three months. Then the boss says, "I am sorry, that won't do," and another young person is taken on. Is it possible to pass a government decision to protect graduates?

Vladimir Putin: Of course, employers may resort to subterfuges hiring young people for two or three months. Then they fire them and take on somebody else on the same terms, and so have cheap labour. But then, trade unions should be on the alert and prevent such absolutely inadmissible things from happening.

As for the problem as a whole, I think it should be solved as follows. Industrial companies, universities, colleges, technical and vocational schools should work in close contact so that the company knows what new employees it can expect, and make orders for training particular specialists. The company should monitor their studies and hire them when they graduate. That is what many companies are doing. They even pay a part of student grants. I think the arrangement could improve the employment situation.

Question: Mr Putin, when you were President, an enlarged meeting called you to turn to the Stabilisation Fund in a critical situation. I liked your answer. I don't remember it word for word but the gist was: "Hands off the Stabilisation Fund."

Are allocations to this and other companies coming from the Stabilisation Fund now? And one more question: You said then that the Stabilisation Fund belonged to future generations. If we borrow from it now, will those generations have any money at all?

Vladimir Putin: We have divided the fund into several parts. Our present allocations come from our reserves-that is, the Stabilisation Fund. A part of our savings keeps the pension system afloat, while another part is used for other goals. That is where we are taking the money from to keep up the federal budget with a deficit estimated at 7.4% or possibly 8%, without needing foreign loans. That is also where the money comes from to support banking and industry, including the automotive industry. We want to be careful with these resources and replenish them someday.

We are not going to squander the fund completely. It is our duty to draw from it today to ease the economic shock in the current situation in Russia and the whole world, provide a remedy against these problems, and eventually resume sustainable development and replenish our savings again.

We have made pledges, raised public wages and pensions, and promised further pension rises. We have promised to raise the social pension to the subsistence level by the end of the year. Pensions will stay small but still they will be better than before.

We have promised to work on other social priorities, such as healthcare and education, and earmarked relevant allocations. We have cut some of them but we cannot afford drastic cuts to send social welfare into collapse. That is why we have taken something out of our reserves to make planned allocations and adjust the economy to the present situation. I repeat once again: We will certainly resume normal performance and progress, and replenish our savings.

Responsible financial policies and increasing reserves are among the pivots of our medium-term activities.

I think it has been a very interesting and informative talk. Now, it is time for me to discuss the problems of the automotive industry with my colleagues. Thank you.