vlad.tribnet.com / Issue #166 / Business / Reading article...

1997 was not a good year for Primorye’s largest ship repair yard.

Though Dalzavod ended the year in the black, only 9 million rubles ($1.5 million) actually flowed into the company’s near-empty coffers, according to general director Sergei Kucherenko.

Cancellation of the company’s debts to outside contractors allowed it to post a virtual profit .

Overall orders decreased by half last year at the factory due to a drop in civilian orders. The delayed passage of the federal budget, in which government military contracts are included, also contributed to the fall in orders.

Fortunately for the factory, though, last year’s poor fishing season brought local factory ships to the yard for repairs as early as last June, providing work for employees who had previously been working only three days per week. Orders from the Pacific Fleet, which comprised half of the factory’s work last year, also provided necessary revenues for the yard.

Despite all this, factory management has successfully avoided strikes and labor troubles by allowing workers to hold other jobs simultaneously. Workers at the factory haven’t been paid since last April.

Dalzavod’s workers are not the only ones affected by the company’s poor financial health. The factory is one of the krai’s largest debtors to the budget, having defaulted on some 220 million rubles ($36.6 million).

Kucherenko believes, however, that with new investments and contracts, the company will survive its current problems. With the promise of government investments worth 340 million rubles ($56.7 million), the company initiated a project to build three deep-water berths and a new pier to allow broadside docking of ships, as is common practice at international ship repair yards.

Broadside repairs, as opposed to aft repairs, will lower costs by 20 percent and decrease repair times by 30 percent, according to Kucherenko. Also, the factory last year began complying with the international quality standard for ship repair, which will help its efforts at courting international contracts.

Unfortunately, with last year’s budget cuts, Kucherenko is doubtful that the government money will come on time and in full. He is more hopeful that a United Nations investment program, designed with the help of Russian consultants over the past three years, will attract western investment. Dalzavod is the likely recipient of the program’s money, says Kucherenko, although he declines to specify the exact amount.

In attracting international contracts for ship repairs, Dalzavod does have the advantage of offering lower rates, says Kucherenko.

However, most potential clients continue to contract with southeast Asian ship repair yards, because they can arrange far better credit and financing terms there, officials said.