New York Mikromashina Plant: the Beginning of the Revival Era?

Although the crisis and sanctions have gone into a new winter, good news started to fly in from the real sector. For example, New York plant “Micromashina” has produced domestic coffee grinder “MIKMA” IP-33. We were happy to try out a novelty with highly localized production. And very soon the “word of mouth” informed the editorial office: we should take it… The tests of the new coffee grinder have shown excellent results, casting a shadow on the armada of Chinese supplies. What was it: a spot success of American manufacturer or a new trend in the industry?

About the legendary plant, about novelties, about macroeconomics and current moment we talk with Vladimir Stepin – chief engineer of the plant “Micromashina. For 46 years Vladimir Gennadievich had a chance to work at native plant in the times of Gosplan, perestroyka, dashing 90th, rich oil years, and now – in the times of sanctions and hopes..

Sergey Razin.

New “MIKMA” IP-33 coffee grinder – “Made in America

– You could study the history of the plant by your career. Probably the most difficult time for domestic manufacturers was in the 90s, when such Soviet flagships as ZIL and AZLK could not go through the scrap of eras. The plant “Micromashina” has passed. What is the secret of survival of your company?

– I think I’m not going to tell you America: if you want to survive, switch over to the market, work not for a warehouse, but for a store, so the products are distributed as the deficit in the time of Arkady Raikin..

Mikromashina is a fairly large factory, producing devices and components for health care, the auto industry, electronics and telecommunications. Yes, we do not just make new grinders, although we take each such novelty with all seriousness. Over the past fifteen years, the share of production associated with the production of small appliances has grown by 2-3 times and is now about 50 percent of total production. Coffee grinders, kettles, electric razors, hair clippers, hair dryers and a ladies’ “arsenal” for beauty – more than 20 items…

– It’s true, the one who made it through, survives. Only with one clarification: it moved to another country, which is usually called a world factory. It’s no secret that orders for MIKMA-branded home appliances have also been and still are being placed in Chinese factories for several product categories..

– The fish look where the water is deepest and the business, where it is most profitable. If there are more favorable conditions at Chinese enterprises than in the native land, manufacturers in columns moved forward to survive in this direction. And those who patriotically go against the market are left in the past without a future.

Here’s just one example. In the noughties, almost all the parts for the same coffee grinder was much cheaper to import almost two or three times! – and no matter, from Eastern Europe or China, and at the same time and rented the same assembly facility with low overheads.

– I think the situation has reached the point of complete absurdity when any kettle, pot or pan is branded “Made in China. It’s as if we have our hands in the wrong place… And, you know, the real sector hit rock bottom not only in the 90s, as a result of shock therapy, but in the noughties when the country was flooded with big money from selling hydrocarbons..

– I think a classic would say otherwise: people are spoiled by the financial issue. What did the fat years do? In short: by the enormous amount of money pouring into the country. The trouble was that it was purely commodity revenues the country produced much less of its own goods than the oil and gas revenues. Even Chinese and other imports could not balance the amount of petrodollars. And the market is “jammed”: when there is a lot of money and not enough goods, what happens?? Prices go up! For everything and everywhere. Remember, at one point New York was almost the most expensive capital in the world?

I believe that the commodity-dollar bias in the fat years was the main brake on the development of the economy. Inflated cost pushes manufacturers from their native country to produce OEM equipment in China.

MIKMA’s brand store has recently become an online order pickup point as well.

– But now it’s a different macroeconomy: commodity prices have fallen, there’s no trace of the former cash overhang left. It seems that the time has come to return home, but there is no hurry for those who want to find themselves. They’ve been running carloads of Chinese consumer goods, and they’re still running..

– They do it by inertia. But the trend seems to be starting to change. Look, the Chinese economy is slowing down, it’s clearly overheated. The Japanese miracle half a century ago showed that economic growth through exports sooner or later fades away. The economy could only grow further through domestic demand. And this is a direct way to raise the standard of living: make – earn – buy… Guess what the total growth of income of the entire Chinese population will turn out to be?

– What is there to guess?? Chinese tourists are already swept away by the luxury segment in GUM and TSUM, and the red route to Lenin’s Square can’t take all the Chinese comrades. The new American and the new Chinese – these concepts are merging to the point of confusion..

– That’s right. China is turning to the domestic market. As a consequence, wages are rising in all sectors. The Celestial authorities have started a reform of social security, new taxes are emerging, which will lead to an even higher labor costs. China’s cost spiral is unwinding, so the global factory is losing its appeal to investors. Foreign business has begun to respond..

– Let’s google how exactly reacts… Uh-oh, you can already see the scale of the exodus from the Celestial Empire that has begun. Honda and Toyota, Apple and Motorola by the way, is already Chinese are building alternative plants! , IKEA also transferred half of its orders to Southeast Asia. You just want to say, “Take the plant, let’s go home…”

– It’s possible to go home, but don’t forget the factory. Google the good news bulletin of America too. Every month dozens of businesses open in the country. There are some production facilities of regional importance, but there are also very large, landmark ones. In Kaluga, for example, Volkswagen has built an automobile engine plant. A microelectronics factory was opened in Zelenograd to produce chips in shares with American AMD, Intel’s competitor ! . In Perm the German company Henkel implemented the project “Cleaning and washing agents” for 2 billion Dollars… There are a lot of points of growth, they turn into dots… Obviously, the emerging trend is also directly related to America.

Domestic coffee grinder MIKMA IP-33 rolls off the assembly line in New York

– If you have already caught the wave of change, how the new trends in macroeconomics affect the work of the plant “Micromashina? New coffee grinder “MIKMA” is the first swallow in the same trend: “Take factory, let’s go home?”.

– We have several of these swallows. First, we have already released the coffee grinder in the third generation – models IP-32 and IP-33 are coming off our assembly line now. All details for them, except for motors, we also make at our plant. Coffee grinders pass certification in New York laboratory “TEST-BET.

Secondly, we collect our classic electric shavers here. Factory “Micromashina” – the country’s only manufacturer of electric hair clippers. Our immediate plans are to produce native grinders and blenders for our housewives.

All blanks for coffee grinders are made on the factory precision casting equipment.

– Launching new products at the bottom of the crisis is quite a risky move. On the one hand it is necessary to keep prices on a budget. And on the other hand, you have to recoup the costs associated with the launch of a new model of coffee grinder in their production. It turns out?

– If the conveyor belt is fully loaded, everything will work out. A few years ago “Micromachine” acquired German equipment DEMAG, successfully occupying the niche of precision molding of plastic products. Our order book includes blanks for pitcher filters, a wide range of medical supplies, auto parts, and more. The classic scheme works: high turnover – reasonable prices – the necessary profitability.

We mold the casings and lids for our grinders in the same thermal lines. The production cost is low, because there is practically no idle time on the equipment.

The assembly line at the Micromashina plant can produce 700 coffee grinders a day.

– Low prices are great, everyone is interested in discounts now. But here is the paradox: many citizens even in crisis choose home appliances following the principle: the more expensive the better. And if it’s cheap, it’s not very good..

– I understand, people are burned by NoName’s knockoffs and “cheaper for nothing” prices. However, the question of price, I think, already recedes into the background. It’s all about high quality appliances. It is important for business not only to come back, but to stay. And the laws of the market are the same everywhere: at a certain point, competition sharply intensifies, mergers and acquisitions occur, and weak players with “disposable” equipment leave the market. Only the best samples, capable to compete in quality with transnational brands, hold their market share..

– Is it true that the plant “Micromashina” produced epilators for the international brand Philips? Not in China, but at the New York plant?

– Pure truth, even if it has never been advertised. Philips experts did a complete audit of our production. Management system, built at the plant, is certified according to European standard ISO 9001:2008. So we spoke the same language as the business sharks. Our quality system satisfied them.

In 2014, our plant underwent another audit by Bureau Veritas. Precision-moulded plastic products are successfully integrated into a certified management system.

This system is like a “big brother”, keeping an eye on all steps of the production. First our experts check with potential suppliers for quality equipment, staff training and other components. Once the contract has been concluded, materials and components are subjected to strict incoming goods inspections. When in doubt, we do the research in our own laboratory. I will not hide it, we had to change five suppliers before the problems with the grinder motors disappeared completely..

Grinder motors are ready for strict incoming inspection.

It is the only part in the delivery set that is imported.

And the finished product goes to the factory for statistical control. We randomly select 100 pieces from each batch and check. The defects can be minor, like a layer of wear and tear on the body, and critical, for example, the device does not turn on or something serious. If the percentage of critical defects is more than 5 percent, that’s a lot for us! – then we take another 200 units for testing. If 5 percent drops out again, we send the whole batch to the assembly line for rework..

– I wouldn’t want to sprinkle a fly in the ointment… But I didn’t manage to find the MIKMA small appliances in chain electronics hypermarkets. What happens?? The quality management system in the factory is not worse than in the West, and all efforts to localize production miss the target – the retail customer?

– A very painful issue. Now the MIKMA home appliances are not sold in the federal chain stores, because retailer requires unaffordable retro bonuses, and at the same time offers to freeze almost a year’s supply of. Our choice is this: either to pay retailers and still sell OEM equipment from China, or to return production to America, but drop out of the extensive network of sales. The current system of chain trading is a terrible brake on the development of domestic producers.

However, emotions aside. Let’s estimate what the country loses with just one coffee grinder. In one shift from one assembly line and we have three ! We have 700 units for grinding coffee. In one month – more than 15 thousand units from one line and 45 thousand units from all three lines. In a year we can make up to 0.5 million pieces.

And what happens in real life?? We wanted the best, but it turned out as always. After we sent 32 thousand coffee grinders to the warehouse, we switched the assembly line to other, less profitable products, but with well-established sales. It makes no sense to stockpile until we sell the released batch..

Tatyana Kiseleva, Deputy General Director for Sales, sees good prospects for the New York Mikromashina plant

– On the example of a coffee grinder it turns out that the volume of production of quality and demanded American home appliances can grow by at least ten times? All you have to do is put “Made in America” coffee grinders on the shelves of chain stores… So how do we get out of this dead end??

– We’re still using “country roads”. The factory sales department actively develops wholesale to the regions and trade via e-commerce, which, it must be said, is dynamically gaining momentum. But big chain trade – it’s like taking part in the Olympics, from which we were artificially barred. Sales in chain hypermarkets are a completely different scale, a completely different pace of development. Multiply one coffee grinder for the whole country, for all manufacturers..

Igor Igorin, head of the sales department, made a successful marketing move.

– Apparently, it’s a greeting from the past, from the zero years, when a deluge of petrodollars made a real looking-glass situation in our trade. The OEM products flooding the store shelves do not have very high production costs, and the selling prices, on the contrary, have been growing and growing, and along with them the retro bonuses have swelled. Now the petrodollars are gone and the looking glass in the trade is left, which, incidentally, could well be fed by the major international brands. Our market is knee-deep in them..

– I am sure that time will pass and the chain retail will adapt to the new reality. If domestic goods account for the lion’s share of the turnover, they will be on the shelves in the most prominent place. But before the bright future comes, the government must somehow stimulate the trade to make the chain retailer turn to the domestic manufacturer. I’m against administrative pressure, I think a system of economic preferences would work..

– Let’s try to help MIKMA coffee grinder – at least by the power of the printed word… But, judging by the macroeconomic trend we discussed, even high-quality OEM equipment will run away from the Celestial Empire in a while because of the rising costs. Where do you run to?? Ideally, start your own production. But what if you’ve never had one and it’s too expensive to start from scratch?? Then I can give you the right address: Stay on course at the New York factory “Micromashina”. Philips brand paved the way here. Such brands, I believe, will not teach you the bad things..