The Baltic Course

The Wheels Go Round and Round...

By Olga Pavuk

In recent years Baltic railways have experienced a great shortage of funds for proper maintenance of rolling stock, this has been particularly true for he region's diesel and electric powered trains. As a matter of fact, most CIS countries are experiencing the same. According to experts, the life span for two-thirds of the region's electric trains has long since expired. With passenger railways amounting ever-greater losses, only barely covered by profits made mainly form cargo transit, railways don't have enough money to buy new engines or carriages. But where there's a will there's a way, and Latvian railway-carriage producers have now taken to repairing and also the full upgrading of electric and diesel trains, just as they've done in hard times before.

After the Soviet Union collapsed, Russia was left almost without any companies able to produce electric trains. The Russian Transportation Ministry solved this problem quickly. Today commuter trains are being made in Demikhovo and Torzhok near Moscow. Railway carriages for electric trains are produced in Tver, and Tikhvin, in the Leningrad region has a facility for assembling and tuning carriages set for high-speed electric trains. Rosvagonmash, a carriage producing company 90 percent owned by the Russian Transportation Ministry, has opened a subsidiary dealing solely with the purchase of old rolling stock for the company. Last year a new passenger carriage cost between 8 and 9 million Russian rubles and a cargo carriage cost 435,000 rubles. Riga railway carriage makers, having somewhat lost their capacity in the recent years of independence, are trying hard to find their place in these new market conditions.

As the story goes

By historical arrangement, a significant part of the Russian railway carriage making business was related to Riga for more than a century. The beginning of the railway era in the Baltics dates back to 1861 when the first railway line in the Baltic region was officially opened between Riga and the southeastern city of Dinaburg (now Daugavpils).
The construction of the Riga-Dinaburg railway created an impetus for opening a carriage making business in Riga. Initially carriages were assembled using imported parts in wooden barracks. Later a company from Köln in Germany, Van der Cipen und Sarlje, built a plant in Riga after receiving an order for 500 cargo carriages in 1869 from the Riga-Dinaburg railway, and named theplant Russo-Balt. In the mid-1870s Russo-Balt switched from the assembly of imported parts to the production of its own cargo carriages, and later even started making passenger carriages.
The Russian Empire's railway boom led to the opening of another carriage plant in Riga in 1895, called Fenikss. The new company was founded by Russo-Balt owner, Oskar Freivit. In 1906 Russo-Balt and Fenikss were incorporated into Russia's large Prodvagon syndicate, accounting for one-fifth of its sales. Production in both plants doubled and even tripled as a result of plentiful military contracts.
A crisis that escalated early in the last century made railway carriage makers also turn towards the production of other items. Russo-Balt started making cars, internal combustion engines, agricultural machinery and even airplanes. Russo-Balt was the leading company in automobile engineering in all of czarist Russia - the empire's total output between 1910 and 1912, was 179 trucks and passenger vehicles, 170 of which were made in Riga. In 1915 Russo-Balt even built the world's first ever tank - a combat vehicle on caterpillar tracks. Through an acquisition of the Riga Metal-Rolling Plant in 1907, Fenikss boosted production of sheet metal and merchant iron, and also started producing agricultural machinery. Railway carriages made up about half of the total output in both companies. By 1913 control over Russo-Balt had passed over to the Russian-Asian Bank, with the Riga Commercial Bank became the main shareholder in Fenikss.
After a series of ups and downs, Russo-Balt was evacuated to Tver in 1915 during World War I, and after having merged with a local plant of a similar profile it grew into the largest military complex in Russia. Fenikss was also supposed to be evacuated to Rybinsk on the River Volga, but the huge evacuation costs, actually granted and paid out twice by the state, had somehow migrated into a commercial bank deposit. The transfer of Fenikss to Rybinsk ended in failure.
The equipment left in Riga after revolutionary troubles and the declaration of independence, allowed production to resume during the first period of Latvia's independence between 1918 and 1940. Fenikss, controlled by German capital, was turning out small amounts of passenger, cargo and refrigerator carriages. In 1936, during the Great Depression, the company was liquidated and taken over by Vairogs, a company that also gave the plant its name. But it was then no longer a railway carriage plant but primarily a car assembly facility using Ford parts. The Latvian Ford-Vairogs truck, made in 1938, was put down in the records of world car engineering. From 1937 to 1940 the plant assembled an impressive 332 passenger cars, over 1,000 Ford trucks and 200 buses, and that's not counting any vehicles made for military orders.
In Soviet times the plant was known as the Rigas Vagonu Rupnica (Riga Carriage Plant, RVR). For almost fifty years RVR was the only company in the Soviet Union to produce electric commuter trains and diesel powered cargo trains. Over half a century the plant become one of the largest facilities of its type in Europe, producing up to 600 carriages per year. RVR was one of the largest engineering plants in Latvia with unique conditions for developing heavy industry: after all it had produced over 20,347 electric train carriages, 1,934 diesel train carriages and 7,744 tram carriages in its time.
After the restoration of Latvia's independence in 1991 and the shaky road to a free market economy, the railway carriage plant lost its strength and ended up on the dinner plate of privatization-hungry disputes. But even in its worst days, namely an insolvency period in 1998, the plant never stopped working for a single day, although cuts in production were not rare at all. In its prime RVR employed up to 6,000 people. Between 1997-1998 its staff fell below 2,000. One of the most complicated aspects was to settle accounts upon the layoff of its workers. The Latvian Privatization Agency allocated 1 million lats for this purpose. By 2001 RVR has only a little over 120 employees left. The country's privatization process split the plant in two. The southern sector (around 10 hectares of industrial facilities) was sold to a private businessman by the name of Mr. Vlasov and now houses the production line for Latvia's Elkor company. Some claim that the area may soon fall victim to Latvia's growing leisure market, with a recreation center set to be developed. The northern part, covering 20 hectares, has now been taken over by Severstallat metal, and is where Riga-based railway carriage production is being reborn.

Revamp and upgrade

Few know that as early as in 1991 part of the RVR staff had moved to a newly-organized company, Rigas Remonta Apvieniba (Riga Repairs Association, RRA). After RVR hung-up, RRA and associated companies RPM (design development) and Remolat (production of components and metal structures) became the first in Latvia to carry out not only repairs but also the upgrading of diesel and electric passenger trains. For some time the facilities of the old railway carriage plant were used for the purpose, but RRA soon found its place in Pardaugava, on the west bank of the River Daugava, where it took over the premises of a former Repairs and Mechanical Plant. In the year 2000 the above mentioned companies acquired full ownership of the entire territory covering an area of 12.5 hectares together with land and buildings. Yet their capital has nothing to do with foreign investments, most of the founders and personnel being former staff members of the RVR.
Mr. Vladimir Patsanovsky, who had spent 25 years as the chief designer with the RVR, became president of all three companies. RRA employs about 400 people at its facilities. The association is kept steadily above water level steered out of loosing streaks. Workers are paid monthly wages of 150-200 lats (above average national income level). And they get their paychecks regularly, on the 10th day of every month, underlined the company president.
In general terms the technology of upgrading trains could be described as the extensive modernization of rolling stock that has already served its original service life on the tracks. In fact it is nearly a complete overhaul: bodies are re-welded, and new engines and electrical equipment are installed. The replacement of running gear is done by associated companies. When upgrading a train, customer preferences are taken into account. For example, diesel trains headed for Lithuania are fit out with bicycle stands in every carriage. Trains running between Tbilisi and Batumi in Georgia come equipped with a small, yet classy bar. Interior designs are also made to suit national customs: Latvian or Lithuanian trains have their interiors done in more reserved and subdued colors while the Georgian trains are done up in vivid colors. Since 1992 the association has been working under contracts with the Baltic states, Ukraine, Georgia, Belarus and Russia.
A new three-carriage train costs some 4.5 million US dollars while a three-car diesel train upgraded by the RRA costs a little over USD 700,000, upgrading extends the train's service life by some 15 years. In 8 years the RRA-Remolat-RPM association has repaired and upgraded 93 railway carriages, including 34 passenger cars, 55 diesel cars, 4 electric and 5 diesel engines. Ten three-car diesel trains were upgraded for Latvia alone. Among the most recent contracts, an upgraded six-car diesel train for the Lvov Railway in Ukraine could be mentioned. Sub-contractors include Latvian companies as well as leading companies from Germany, Austria, Hungary and Finland supplying the association with equipment and parts. Other components are supplied to both Russia and Latvia. According to Patsanovsky, the company's capacity is being used only to an extent of 25 percent, as it could turn out up to 50 railway carriages and 500 tons of metal constructions a year if it had enough orders placed.

Daugavpils joins the game

The Lokomotivs company from Daugavpils (once Dinaburg) in southeastern Latvia also dates back a while. In 1866 the Riga-Orel railway opened a railway repair shop in Dinaburg, considerably cutting the costs of delivering Russian grain to Baltic sea ports. Lokomotivs has never built railway carriages. The plant specialized in steam engine and cargo carriage repairs until 1959 when it took up diesel engine repairs. In 1992-1993 it started repairing electric trains and two years later, also diesel trains for Latvia, Lithuanian and Russia (today Lokomotivs is still found on Russian repair plant lists). Lokomotivs is the largest company in Daugavpils by number of employees at 2,300. After being privatized, 51 percent of the company shares are held by a local company, Remlok. Lokomotivs has a paid fixed capital of 8.294 million lats.
In later years Lokomotivs accumulated huge debts that it is still having troubles to pay off. In the summer of 2001, the company's total debts exceeded 5 million lats, 2 million lats of which were overdue social tax payments that must be settled by Oct. 1, otherwise a clause of default interest will be applied and the debt will double in a very short while. By July 1 the company had paid off its debts only to a total of 1.55 million lats. Director of Lokomotivs, Emils Buss, believes that legislative amendments allowing to freeze debts, reduce tax rates and alleviate sanctions are required to promote industrial development in Latvia.
Having won a tender held by the Latvian railway company Latvijas Dzelzcels, the company repaired 46 railway carriages for a total amount of 1.680 million lats in four months of 2001. Latvijas Dzelzcels took a state-guaranteed loan to pay for the order. A large proportion of the parts Lokomotivs uses is supplied by the RRA. In 2001 the company plans to provide its customers with 9.05 million lats worth of services.

Historical justice

The Riga carriage plant is making a comeback. In January 2001, the Rigas Vagonbuves Rupnica (Riga Carriage Construction Plant, RVR), not to be confused with the original Rigas Vagonu Rupnica carriage plant also abbreviated as RVR, was listed on the Latvian Company Register. The company's shareholders, Felix (75 percent) and Vairogs K (25 percent), invested 22,250 lats in its registered capital. 
The plant is situated in the northern part of the former RVR premises which had for the past 8 years been used under a lease by Severstallat (part of the Felix holding) and Vairogs M for selling rolled steel on the Baltic market (made mostly by Russia's Severstal metal co.). It could be worth mentioning that the Director General of Severstallat, Valerijs Igaunis, also added that Severstal has acquired the Kolomna railway carriage plant near Moscow, employing a massive 20,000 people.
The northern part of the old RVR territory (covering about 20 hectares) accommodates four different companies. Some 2-3 hectares are taken up by Vairogs M, producer of metal structures for construction, including transmission towers for Latvijas Mobilais Telefons mobile phone operator. Most of the remaining territory is occupied by Severstallat, which intends to restore the railway carriage construction plant (covering around 60 percent of the plot). It is also the location of a metal technologies park for sale of metal, opened earlier in July. Igaunis expects the park to achieve a turnover of 20 million lats by its first year of operation. For comparison, the current annual turnover of RVR is between USD 5 and 6 million. Severstallat has already invested USD 5.7 mln in the first stage of reconstructing the technological park, and that's the largest foreign investment made anywhere by Russia's Severstal. In addition, the northern area also houses a service center. The new Riga company has preserved unique technical documentation of the old RVR carriage plant, and its development program calls for the introduction of modern technologies in cooperation with Japanese, Swedish, Finnish and Russian companies. The new owners are set to make radical changes to production in the next two years in order to obtain an ISO quality certificate and start turning out products in strict compliance with environmental requirements.
The director of RVR, Lazar Raizberg (having worked for RVR since 1976 and promoted from designer and technologist to technical director in Soviet times), points out that the plant's equipment is far from new and could be much better, but even so, the existing equipment still allows for constructing more railway cars. It should be noted, however, that this isn't about producing new diesel or electric trains, only upgrading them. Meanwhile, as Raizberg said, "Historical justice has been done - 170 Riga trams have recently passed through the hands of the railway carriage builders. Their service life was extended by 12 years, and everything except for the interior and electric devices was done by the RVR itself." The plant also repairs cargo carriages and transforms them into platforms for transporting timber or containers with orders received from both West and East. The director said the plant is looking for major customers mostly among its older clients. For example, around 50 trains built in Riga are currently still running in Bulgaria. The same is also true for Kazakhstan, Ukraine, Belarus, and regions of Russia. "The RVR once had a monopoly, today we have to demonstrate that besides the name we also have the actual potential for work," said Raizberg, "Today the RVR is trying to compete with RRA and Lokomotivs in providing train repair services." The RVR won a tender held in June by Latvijas Dzelzcels for the overhaul of six railway cars after offering the best price. This is one of the first orders won by the railway carriage plant reborn.

What lies ahead?

RRA is the only company offering train engine upgrading services in Latvia, but in other countries this business is also done by the Railway Car Depot in Lida, Belarus, and not to mention the Estonian shipyards. As for building new electric and diesel trains in Latvia, only Lokomotivs from Daugavpils and the RVR actually have license to do so. Outside Latvia the competition in construction of new trains includes the Demikhovsky plant in Orekhovo-Zuyevo near Moscow and the Tver railway car construction plant. It was by the way precisely this Demikhovsky plant, which during the Soviet Union's Perestroika period, lured around one hundred fairly competent experts, to say the least, away from RVR by dangling a set of keys to brand new apartments along with their fat new jobs in Orekhovo-Zuyevo.
Director of the Latvijas Dzelzcels national railway rolling-stock department, Janis Petersons, told the BC that "in five years or even sooner, there will be no electric or diesel trains left in Latvia. Everybody will be catching the bus. Latvia and Albania are the only two countries in Europe not supporting their railways with money." Valerijs Igaunis responded to this statement rather philosophically by saying "It's a political matter." In the opinion of Severstal sales director, Dmitry Goroshkov, Russia's prohibition of metal transit via Baltic ports is also a political matter. Igaunis believes that this was exactly the reason why the monthly amount of metal handled by Baltic ports fell from 200,000 tons to 150,000 tons in the first quarter of 2001.
"The Russian Transportation Ministry is now working on a uniform tariff rate for transportation of both export and domestic cargo. Let us hope that after this we will again be able to use our Baltic ports for metal transit. The more options are open to us, the better," said Goroshkov, speaking at the opening of the RVR distribution center.
Competition on the carriage construction market is growing stronger. It is clear that in the foreseeable future we may only speak of repairing old trains or, at best, upgrading them. Even developed countries are upgrading their trains to make them not only more comfortable, but to also extend their service life by some 15 or 20 years. Janis Petersons believes that the RRA production capacity is more than enough for the entire Baltic region. "The RVR missed its chance in selling out to Russia - it had a real opportunity to work for the Russian market. Now the Demikhovsky plant is taking care of the demand for electric trains."
In conclusion, it may be appropriate to give a few key figures: in Soviet times the RVR alone used about 36,000 tons of metal annually for its production of railway carriages. The enormous amount of metal consumed by production was one of the favorite arguments used by politicians of the time, seeking to run down the industry. Today Severstallat processes around 100,000 tons of metal annually, and nobody in Latvia is saying a word about the large consumption of metal any longer, but nor does anyone speak of super fast trains run by electronic devices replacing the human operators we had grown so accustomed to at the controls of a train.

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