Memorandum for Privatization of Tupolev Division
It is proposed to take over the Tupolev Military Aircraft Production Unit from the Russian Government since it is not, presently, in a position, for financial reasons, to build military helicopters here. The plant capacity is idle at the moment, and running at severe losses, due to non-production of aircraft. Although the Russians have expressed reservations over the sale of a unit which has strategic defense overtures, the only way this company could be bailed out from future insolvency, is through a complete takeover. The Russian Government is not in a position to invest heavily to rejuvenate this industry, nor is there any entrepreneur, in the private or public sector in Soviet Russia, capable of massive doses of investments needed to take over this ailing industry.
However, the major aspects to the deal would be with regard to the financial restructuring of Tupolev Division. Formerly it was a military defense production installation with focus on production, delivery and military operationability. With the breakup and disintegration of the erstwhile Soviet Russia into different confederations, this unit now ceases to have any military significance. Lloyd’s main reason for staking its claim for a buyout is because it has a good Research and Development Wing, which could be optimized with its proposed integration to Lloyds. US Military analysts have admitted that Russian aircraft technology has a definite edge over American technology. The main thrust areas for converting into a profit center would be:
- Layoff of excessive work force
- Introduction of modern management tools and techniques including TQM, Six Sigma, PERT, CPM and Just in inventory control systems
- Introducing a decentralized and delegated work flow culture with accountability moving upwards instead of the present highly centralized work culture.
- Installing individual Profit centers for each division with departmental heads in full functional control and mandatory weekly performance reporting to the CEO.
Regulatory arrangements with the Russian Government
Our Company, Lloyd Aviation Company have a lot in common with Tupolev- we are both in the helicopter business and both have high production capacities, to produce and install advanced civil, military helicopters and aircrafts, used mainly for defense, agricultural and Surveillance purposes. Our helicopters rank as one of the best in the world markets and are in heavy demand. Our main need, at this hour is to use Tupolev’s idle infrastructure for making civilian helicopters at economical rates that could be sold in the Lloyd’s growing markets in the US and other markets around the world.
Moreover, with the present state of Tupolev, it is possible to buy out the unit at a very economical price. The financial implications of the buyout can be worked out, after the Board of Directors, in principle, decides to go ahead with the proposed buyout. This is after the proposal is placed at the general meeting of Directors of the Company for seeking their ratification for the proposed buy out. The Cost Benefit analysis and financial evaluation of the proposed deal shall be separately delivered to the Board of Directors for their perusal and necessary action in the matter. It is believed that the acquisition of Tupolev by Lloyd Aviation Company would result in making of low cost civilian helicopters that could be used for Lloyd’s burgeoning markets in the country and abroad.
The regulatory arrangements that Lloyds needs to make with the Russian Government is first to seek the permission, and the consent of the Russian Parliament, with regard to the proposed takeover. The Department of Military Aviation also needs to be taken into confidence with regard to the proposed takeover. Since there are major concerns, that this takeover may compromise the territorial integrity and sovereignty of Soviet Russia, the deal being with regard to sale of a military helicopters Company, the Russian Government and people need to be assured that all matters dealing with the deal would be treated with utmost confidentiality and secrecy, both within and outside the country. The deal would be given the significance and weightage that is due to a strategic military alliance and would not be allowed to be compromised at any cost. Moreover, the permission of the stakeholders of Lloyd Aviation Co. is required, since the Company is a listed one and needs approval of the majority Board of Directors and stakeholders at the General meeting.