06.05.2010 11:30
STRENGTH TEST

Ukraine ’s defense industry has a considerable Soviet-era legacy of research and technological capacities. This mouth-drying stock-phrase is as true as the fact that we do not use these capacities like Taiwan , South Korea , or Singapore did. They had a much lower start, but they have managed to convert their scientific and technological potential into real national and international hi-tech projects, gaining financial and political profits and enhancing their image.

In this regard, the Ukrainian limited liability company Industar-M is a common yet unique phenomenon: common because it was one of many R&D organizations that had to switch from research over to business in the mid-1990s just to make ends meet; unique because it became an official representative of a major Indian corporation in the CIS and Eastern Europe that operates in the science-intensive hi-tech segment of the market. The company also has its own successful projects with a high export potential. This success does not seem to give someone a moment’s peace…

Narrow Specialization and Indian Trace

To be honest, the best I expected from my meeting with Industar-M director Yevhen Mitchenko was that it would not be boring (considering the company’s rather narrow field of activity), and I did not count on any unexpected turns or sensational disclosures. But let me begin with the background.

Industar-M was founded by specialists of a very specific profile – structural integrity engineers who had worked at the Kyiv Institute of Strength Problems under the Science Academy of the Ukrainian Soviet Republic doing research in the strength of structural materials, components, and built-up structures under various extreme conditions. In particular, the research involved tests under low and high temperatures, exposure of materials to radiation, and various dynamic and cyclic loading, including simulation of actual aircraft loading conditions. The research focused on the physical phenomenon called metal fatigue (when even small cyclic loads can cause fatigue cracks in metal structures that eventually grow to catastrophic proportions).

It should be mentioned that the Institute of Strength Problems (ISP) used to have big contracts with many defense industry enterprises of the former USSR , including the space rocket enterprises in Dnipropetrovsk, the R&D association Enegiya in Moscow , the design bureau Lyulka, and Prometheus in Leningrad . Endurance was the prime requirement as failure of structural components could have led to catastrophic consequences. For example, many parts of nuclear reactors are exposed to cyclic stresses. As we can see, the specialization was narrow but the application area was vast.

Very importantly, ISP strength engineers worked in India under an exchange program between India and the USSR . Yevhen Mitchenko, soon after he defended a Candidate’s thesis, worked at the National Aerospace Laboratories in Bangalore for two years (1991-1993). There he established good personal contacts with Indian researchers and now successfully cooperates with them.

In the mid-1990s, when many research institutions in Ukraine were ruined and many highly qualified specialists lost their job, ISP had a hard time struggling for survival. Its contacts with Indian partners, however, remained strong. Later, Dr. Mitchenko’s Indian colleagues took up manufacture of servo-hydraulic testing equipment – machines that determine strength and fatigue properties of materials, crack resistance and fracture toughness characteristics, etc. In 1992 Dr. Sunder founded the company Bangalore Integrated System Solutions that soon became a monopoly supplier of such equipment in India and gained strong positions on the international market. It’s customers include major aerospace and automotive companies including General Electric, Honeywell and Delphi Automotive Systems. BiSS owes its success to the fact that it was started by professionals who had worked with similar technology at the National Aerospace Laboratories, and then began to manufacture it as scientists who knew the matter from within.

In February 2007 Yevhen Mitchenko founded the limited liability company Industar-M headquartered in Kyiv. Soon it became an official representative of BiSS in the CIS and Eastern Europe – and that is quite a large geographic scope. Industar-M basically engages in promotion and marketing of BiSS testing equipment, installation and commissioning, warranty and post-warranty services, adaptation of standard software to concrete customer objectives, modernization of existing testing equipment by replacement of control and measurement systems with new Indian-made ones, adaptation of Indian supplies to suit specific customer requirements and training of customers’ personnel. Industar-M leased its office from the Institute of Strength Problems as both were working in practically the same field. Notably, ISP director Academician V.T. Troshchenko served as a mentor and source of considerable encouragement and moral support believing in its potential . At first the project was taken skeptically due to the high price of servo-hydraulic testing equipment. For example, one complete assembly of a servo-hydraulic testing machine with maximum load capacity of 1 ton is around $50,000, and bigger testing systems may be priced at $200,000 and higher. Naturally, there were strong doubts as to demand for such expensive equipment in Ukraine . The doubts, however, were dispelled very soon. In 2007 Industar-M signed its first contract with the state enterprise National Nuclear Energy Generating Company “Energoatom” that ordered one testing machine. Since the summer of 2008, a testing machine with maximum cyclic loads of 5 tons has been used by the Institute of Nuclear Research at the Academy of Science of Ukraine . The machine installed in a ”hot cell” is on practically 24 hours a day testing materials exposed to radiation under a Ukraine-IAEA program for extending the operation of nuclear power generating units. In October 2009 Industar-M designed, manufactured, and supplied an additional software module for determining fracture toughness characteristics of materials.

A natural question arises: was it possible to launch the production of such equipment in Ukraine instead of acting as a dealer for an Indian company? The fact that such equipment had never been produced in Ukraine is a convenient but far from complete explanation. The USSR used to have a plant in Armavir that produced similar machines but they were unable to raise sophistication, quality and reliability to the emerging levels of digital test control. However, the plant kept receiving orders as long as any purchases of such equipment (90 percent of which was used for defense) from “capitalist countries” were banned in the USSR . There were, however, some successful attempts to circumvent the ban. 30 years ago, the ISP managed with great difficulty to buy one machine from Schenck, a German company.

BiSS was interested to have its product support centers in different parts of the world, and Industar-M became one of them. As a supplier of testing equipment, Industar-M uses various models. For instance, Indian side often concludes direct supply contracts. Since the customers are basically government-funded organizations, the government holds tenders. Industar-M specialists authorized by BiSS harmonize and finalize technical specifications and prepare tender proposals and documents. As a result, BiSS wins the tender (as was the case with Energoatom) and signs the contract as the supplier and Industar-M implements the contract at the equipment commissioning stage.

Tenders may seem to be just a matter-of-fact formality, and so they often are in this country, but this case is special because competition is very tough. In the CIS and East-European markets as well as in others BiSS competes with leading U.S. and British corporations that produce a wide range of research equipment. However, the price of their servo-hydraulic testing machines is 2-2.5 times higher.

Cost Saving and Quality as Main Advantages

As of today, “the testing systems for analyzing strength characteristics of materials” have been supplied through Industar-M to an impressive number of users, including the Institute of Nuclear Research , the Lviv Institute of Physics and Mechanics under the National Science Academy , the Kyiv Aviation University , and the National University of Grodno, Belarus. The Institute of Strength Problems operates four machines, is the most recent one being unique: it loads a sample with axial force and torque simultaneously, thus creating the so-called “multi-axial stress-strain conditions” and simulating real loading on a great number of mechanical parts. It should be noted that the machine was supplied from India and the grips were designed and made by Industar-M here in Ukraine with the participation of Ukrainian machine-building plants.

Currently, a 50-ton axial-torsion machine is being assembled, installed, and prepared for commissioning at the Mechanical and Machine-Building Institute of the national university Kyiv Polytechnic Institute, the alma mater of the Industar-M director and a number of his staffers.

Another market where the company increases its presence is Russia . A large fleet of BiSS testing machines successfully operates at the Novosibirsk-based S.A. Chaplygin SibNIA (Siberian Aircraft Research Institute). In late 2009 Industar-M supplied a testing complex to the Kazan research center of power engineering problems at the Russian Science Academy . The machine performs well there and the institute plans to buy three more. Two machines are being readied for shipment to Tomsk and one 10-ton machine for shipment to an academic institute in Perm. Interestingly, all metal parts of the machine were made by Ukrainian partners of Industar-M and the control, hydraulic, and electronic systems came from India . The test systems are integrated and checked out at the Industar-M facility.

The company owes its success in the Russian market partly to its flexible marketing policy. Last year, for instance, it won a tender in Kazan . The Russian party wanted to pay in rubles and Industar-M met it halfway, and then made the settlement with BiSS in U.S. dollars. Besides the supply of the testing machine, Industar-M received an order for special grips, which were then designed and made in Ukraine without any help from the Indian side. The machine was delivered to Kazan from India and the grips were delivered from Kyiv. Yevhen Mitchenko says proudly, “Cost saving, high technological discipline, and quality are our main advantages.”

Industar-M tries to broaden its customer range in Ukraine , including defense enterprises. There were active contacts with the Zaporizhzhya-based design bureau Ivchenko-Progress. Its specialists were interested in this type of testing equipment, but the financial crisis of 2009 made them hesitate. The management of the Antonov aviation complex has also spoken very highly of the BiSS testing equipment.

Apart from selling new machines, Industar-M modernizes old testing equipment by replacing measurement and control systems, computer units, etc. By the way, such modernization has breathed in a second life into the 30-year-old Schenck machine mentioned earlier. The system is used by ISP scientists to perform contract research for the R&D association Zorya-Mashproekt.

Possessing sufficient capacities and experience in designing and manufacturing versatile machines, Industar-M successfully works in another field where it also has a considerable export potential: it produces and supplies spares and completing parts and materials for repairs of ship engines and mechanisms. In 2007-2009 Industar-M sold such products exclusively within the national market. In mid-2009 Industar-M won a tender where it competed with Russian, Polish, and Bulgarian companies. As a result, the company signed its first international contract and implemented it for the Indian Navy that operates Soviet-made vessels. The supplies included ship machinery and the whole variety of standard-type completing and spare parts and assemblies for serially produced mechanisms in which the Indian customer was very interested. The contract was executed in strict compliance with Ukrainian legislative norms applicable to this “sensitive” sector and all technical norms and regulations for the quality of supplied produce. The Ukrainian party met all the terms and deadlines of the contract. The satisfied Indian customer then signed several more contracts with Industar-M for supplies of spare parts. This may look strange: why does India with its flourishing machine-building industry capable of producing most anything order these products in Ukraine ? Is that because Industar-M offers more preferable terms?

In designing and manufacturing testing and ship equipment Industar-M relies basically on Ukrainian machine-building enterprises, placing orders with plants in Melitopol, Kherson, Mykolayiv, Kyiv, and other cities which have retained their highly qualified personnel, equipment, and tools and which value each order, no matter how much profit it may yield.

“Consequences of Success”

Industar-M is evidently a very successful company – so obvious, that someone seems to be very much willing to mar its reputation or simply take it over.

In January 2010, unidentified persons, using a forged letter of attorney, a forged board meeting protocol, and a changed statute of the company (notarized by a non-existent notary), changed its legal address: Industar-M “moved” from Kyiv to a small shabby hut on the outskirts of Zaporizhzhya. The new address was promptly registered by a state registrar and entered on the national electronic register of corporate and individual entrepreneurs. Criminal proceedings were instituted on charges of document forgery and unauthorized intervention into the register. In early February Yevhen Mitchenko reregistered Industar-M at its previous legal address in Kyiv.

Unfortunately, the machinations with the legal address were not the last of the problems experienced by Industar-M. In March unidentified evil-doers petitioned the Economic Court of the Zaporizhzhya region on behalf of the private enterprise Lant (liquidated by the Kyiv City Economic Court back on November 12, 2003) for instituting bankruptcy procedures against Industar-M. The petition dated March 29, 2010 was supplemented with another package of “documents”: forged contracts, forged correspondence between Industar-M and Lant, etc. Mitchenko notes an interesting circumstance: Judge A.A. Yuldashev of the Zaporizhzhya region Economic Court responded to the petition immediately – the bankruptcy procedure was launched on the very next day. The judge even turned a blind eye to the fact that the so-called “creditor” furnished no documented evidence in support of his claim. Paragraph 9 of the Law of Ukraine on Resuming the Debtor’s Solvency or Recognizing Him as Bankrupt defines this circumstance as legal grounds for turning down a petition for instituting bankruptcy procedures.

Some “well-wishers” must have hired a team of experienced lawyers who know how to make the most of loopholes and weak spots in Ukrainian legislation. On the other hand, the events described above obviously testify to the company’s success. Since its foundation Industar-M has been reputed as a potent, dependable, and trustworthy partner. The company has proven its ability to deal in machines that test metal for strength. Now it looks like the company has to take its own “strength test”…

P.S. Last week Industar-M got a new big order from Russian aircraft builders: they need several powerful pump stations for their field tests.

Vladimir Kopchak, Defense Express