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Amtel-Vredestein CEO Calls for Government Backing for Businesses

(Clacton, U.K./Tyres & Accessories) Speaking at the Russian Economic Forum staged in London, Amtel-Vredestein CEO Alexei Gurin called for President Putin and the Russian Federation to help boost quality, competitiveness and profitability through backing companies in acquiring businesses, technology and skills.

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He stressed that Russia should use oil windfall revenues to support companies who acquire western businesses and technology.

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“The Russian economy needs diversification away from its dependence on oil. And Russian businesses need to acquire technology and strong managers if we hope to become global players and compete more effectively in world markets…and at home,” said Gurin. “That’s why the Russian government should use part of its budget surplus to back companies who are willing to grow through acquisition and who bring desperately needed experience and technology back to Russia.”

Gurin also noted that the European economy could in turn benefit from more acquisitions by risk-taking Russian entrepreneurs who will inject cash and vitality into undervalued, underfunded companies.

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“Not all Russian companies are in a position to effectively leverage their assets or go to the capital markets to finance expansion,” explained Gurin, who used debt to acquire Dutch tyre manufacturer Vredestein and floated his company on the London Stock Exchange in 2005.

Gurin explained that there is a ceiling to how much debt many Russian companies can bear and most often must pay a higher rate of interest than their Western competitors. He believes that the Russian government should “level the playing field” for Russian companies by injecting capital exchange for equity, or by instituting tax incentives, or by providing loan guarantees to reduce interest rates.

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Gurin called for the Russian government to rethink its policy of viewing most investment beyond its borders as “capital flight.”

“The Russian government must learn to recognize that “taxes” are not the only dividend it receives from Russian businesses,” said Gurin.

“Of course there are bound to be some casualties among some of these acquisitions or mergers,” Gurin added. Russian businesses are bold risk-takers, but often lack experience and ability to mature on their own in sophisticated sectors. They also may be unwilling to cede authority in order to assimilate top managers. Gurin believes that the mindset of many Russian entrepreneurs will need some adjustment. “Russian executives will have to learn to accept the fact that they can’t take over established and successful companies and tell its more experienced management how to run things.”

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Perhaps the smart ones will do what Amtel-Vredestein has done. “When we purchased the 60 year-old Vredestein Banden company, we approached the transaction much like a reverse merger,” said Gurin. "Today, Vredestein executives represent 50% of the Amtel-Vredestein Executive Board; they oversee our Russian factories, research and development and the group’s finance team. We acquired experience, technology and an important brand, Vredestein – the only ultra-high performance designer tyre in the world. And we are leveraging these assets throughout our organization. The Vredestein business is also enhanced by access to lower costing, Russian production and a new, rapidly expanding market for its tyres. Everyone wins.”

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