As German machinery executives gushed about Russia as a promising market in Eastern Europe, Helmar Franz offered some firsthand expertise as the man in Moscow for Demag Ergotech GmbH.
Franz said Russia has the potential to be a huge market for injection presses - if the country can achieve the political stability that business leaders need to make long-range investments.
That's a big if, said Franz, who ran Demag's Moscow office for five years. Russia will hold parliamentary elections Dec. 7. Supporters of President Vladimir Putin dominate the State Duma, or lower house of parliament. Putin himself is up for re-election in March, so the Duma elections are the focus of intense political action in the country of more than 140 million people.
Russia is focused on politics, not business, these days, Franz said at Demag Plastics Group's Oct. 16 press conference during Fakuma in Friedrichshafen.
``I can tell you nearly nobody in the government now is taking care about business development. They're just preparing for the elections. In Russia, the development very much depends on such situations,'' Franz said.
In the uncertainty, Russian molding companies turn cautious. Also, outsiders may hold off on placing financial bets in Russia.
``I think the potential for such a huge growth is there, but it depends on whether European manufacturers will go to Russia, or will they still find Slovakia or Poland the easier way to go,'' he said.
Franz joined Demag in 1990 and headed the German press maker's Moscow office until he was put in charge of Demag's small-tonnage injection press plant in Wiehe, Germany, in 1995. Then in 1999, Demag promoted him to its top post, executive managing director.
Franz now is co-executive managing director of Demag Plastics Group, formed last year when sister companies Demag Ergotech and Van Dorn Demag Corp. merged. He said DPG is a market leader in Russia.
According to Franz, the Russian market for new injection presses is 150-200 units a year, including machines from China and Taiwan. But he said the real market is much larger: 400-500 used machines imported into Russia, plus another 400 or so machines sold between molders inside the country.
Many of the machines are very old. They include a huge number of the old Kuasy-brand presses that were made in the former East Germany for the Communist bloc.
``From what we see, there's still something like 8,000 Kuasy machines still in operation,'' he said. ``Those machines have not been manufactured for 14 years, so they just begin to fall apart. The Russians are very innovative at repairing machines, but there's a limit to everything,'' Franz said with a chuckle.
Franz said Demag Plastics Group customers still use the presses to mold simple parts. That makes selling new machines a challenge. ``They say, `I don't need a very complicated machine for making these parts,' '' he said.
Russian plastics executives have a hard time making long-term plans in Russia's uncertain political and economic environment, Franz said.
``They ... buy a second-hand machine, or a cheap Chinese machine because they say, ``OK, we help ourselves for the next four to five years, and then we see,' '' he said.