Manufacturers Linked To Russia Are Trying To Spin

Manufacturers linked to Russia are trying to figure out how to survive after sanctions imposed on Russia in recent weeks restrict the flow of goods and money between the country and Western markets.

Sanctions and attempts by private companies to leave Russia have upended the activities of companies whose property and supply chains are connected to Russia. Russian-linked executives have said they are reconfiguring suppliers and logistics, temporarily suspending production and handing over control to US employees to continue doing business.

IMZ-Ural Group Inc., based in Redmond, Washington for more than a decade, suspended production of the sidecar motorcycles it makes in Siberia on March 2 and sent its production workers home to save money. . The company, which dates back to the 1940s, does not know when it will be able to resume deliveries to its customers in Europe and the US, executives say.

“Ural is a motorcycle that fought in World War II for peace, and now the same motorcycle is between a rock and a hard place,” says Madina Merzhoeva, head of marketing for the company based in Redmond.

Ural relies on global supply chains, importing most of its components from other countries, assembling them at its plant in Russia’s eastern Ural Mountains, and then exporting the finished machines to buyers looking for an off-road sidecar.

Incab America relied on its Russian parent company for critical components.

Russia was the 24th largest trading partner of the US in 2021, according to census data, with the US importing about $29.7 billion worth of goods from the country and exporting about $6.4 billion. Many of the goods imported from Russia include oil and other energy products, as well as fertilizers, nickel, steel and other industrial materials.

Russian fiber optic cable manufacturer Incab LLC began cable manufacturing in Arlington, Texas in 2018 through its US subsidiary. Incab America made about 75% of its own cables last year, but still relied on its Russian parent company for critical components. According to Incab America CEO Mike Riddle, these components have been discontinued.

Incab America chief executive Mike Riddle says: “I’m working to break my supply chain with Russia as quickly as possible.”

“We are struggling to find what I can replace these semi-finished products with,” he said. “I am working to break my supply chain from Russia as quickly as possible.”

According to Mr. Riddle, Incab America is expanding its own production. According to him, European-made equipment intended for the parent company in Russia is redirected to Texas.

Incab is also changing its ownership structure. Mr. Riddle said that he and possibly other Western investors would soon become owners of a US subsidiary, which Mr. Riddle called a corporate restructuring. The move was motivated by a law passed in Texas last year that prevents Russian companies from playing a role in the state’s critical infrastructure, Mr. Riddle said, and was hastened by the fallout from Russia’s invasion of Ukraine. He becomes president of a new independent company after being executive vice president of Incab’s American subsidiary.

Prior to the Incab invasion, America expected revenue growth of 60% in 2022, Mr. Riddle said. It now hopes to reach revenue levels in 2021.

Companies that manufacture in the US but rely on Russian products and materials also face challenges.

Incab America made about 75% of its own cables last year, but still relied on its then-Russian parent company for key components. Now deliveries of these components are stopped.

North American Plywood Corp. imports Russian-made birch plywood to its factory in Parsippany, New Jersey, where workers cut the wood and digitally paint it. According to general manager Donald Kooser, it is used in recreational vehicles, trucks, children’s furniture, and concert speakers due to the wood’s strength and relatively light weight. Now, he says, the company can’t get plywood from factories in Russia because shipping companies don’t call at Russian ports.

Mr Cooser said some of his orders have already been put on hold for next month because his suppliers say they’re not sure they can deliver the products to him.

“They still make plywood,” he said. “How can we get it here? That is the question.”

His suppliers may end up chartering their own boats or using trucks to deliver from European ports, Mr. Kucer said, if they are allowed to. He gets calls from customers asking for alternative supplies, which he says are also in short supply. According to him, it will not be possible to replace the Russian birch in the short term.

Machinery at Incab America, which is changing ownership.

The Kitchen Cabinet Manufacturers Association estimates that Russia supplies approximately 10% of US hardwood plywood, and that imports from Russia have been growing rapidly in recent years.

Ural has assembled the finished motorcycles at its factory, as well as two containers of assembled motorcycles at the port of Hamburg in Germany, awaiting delivery to customers in Europe and the US. German customs officers do not sign documents, and transport companies do not transport goods. because they are from Russia, said Ilya Khait, head of the Urals, a Russian citizen who lives in Washington State.

Mr. Hight said his focus now is on keeping his company running 12 months from now. Ural said it has additional stocks of spare parts that were built in response to supply chain problems caused by the pandemic, and the company is keeping its money in a Russian bank that has not been sanctioned.

Since Russia invaded Ukraine in late February, the US and its allies have imposed tough sanctions on Russia. Shelby Holliday of the WSJ details how these sanctions affect everyone from President Vladimir Putin to ordinary Russian citizens. Photo: Pavel Golovkin/Associated Press

Mr Hayit, who helped turn the former state-owned company from a mass motorcycle manufacturer into a custom bike manufacturer, said the daily tide of new sanctions and actions from private companies leaving the country is making planning difficult. The House of Representatives has passed a law that would sever normal trade ties with Russia, potentially raising tariffs on goods made in Russia, while Russia said it would ban some exports.

Mr. Hight said he was concerned that the company’s entire business model of relying on both imported parts and export markets was not working and said all options were being considered.

“Essentially, we need to figure out how to reinvent ourselves,” Mr. Hight said.

Cable on a reel at Incab America.

Write to Austin Hufford at [email protected]