Ben Aris in Moscow -
Most people in Moscow live in an apartment block. As by far the biggest city in Europe, there is little space for suburban housing – not that you’d want a garden anyway thanks to the long cold winters. So the Soviets built huge apartment blocks – often by slotting together pre-cast concrete panels – and everyone who wanted got a dacha outside the city limits where they could grow potatoes and enjoy the long summer holidays. This cultural quirk means Russia is a paradise for Otis, the world’s largest manufacturer and maintainer of elevators, escalators and moving walkways.
“Otis has operated in Russia for more than 120 years, when the company put the first elevator into the Winter Palace in St Petersburg for Tsar Alexander III,” says Giorgio Elia, Eastern Europe vice president and general manager of UTC Building & Industrial Systems, of which Otis is a part. “Elevators have changed a lot since then, but one thing that has not changed is our commitment to the country, by providing safe, innovative and energy-efficient products, sourcing materials for local manufacturing and by employing and investing in local employees.”
Today, the company supplies and services the immediately recognizable spring-loaded floor style elevators that are ubiquitous in Russian apartment blocks from one of its three Russian factories. A small percentage of the parts are imported, mainly the electronics for the elevator’s ‘brains’. “Russians, like many people around the world, have always needed reliable elevators,” says Elia, who arrived in Moscow only three months ago to lead Otis Russia. “The Otis name is so widely known that many people here think we are a Russian company. With three factories in Russia, more than 3,600 Russian employees and many satisfied Russian customers, we sometimes forget ourselves that the business was founded in the US more than 160 years ago. We’re proud of our global reach, as Otis equipment carries the equivalent of the world’s population every four days.”
United Technologies Corp, the parent company of UTC Building & Industrial Systems, has been doing very well in recent years, with sales for the entire group growing steadily from $52.3bn in 2010 to top $65.1bn at the end of last year, according to the company’s latest annual report. Organic sales growth at Otis, the company said, was primarily a result of higher new equipment sales in China, the US and Russia. UTC’s sales to customers in Russia in 2014 were approximately $500mn and its net asset exposure in Russia as of December 31, 2014 was approximately $125mn. While Russia is a key supplier of certain commodities and parts, the company said it has taken steps to minimize the potential for disruption to its business. “To date, we have not seen any significant signs of disruption, although we continue to closely monitor developments in the region,” UTC said.
Alongside the growth in its business, UTC’s earnings per share have also risen by about a third over the 2010-2014 period to $6.82 per share. And the company has generously returned an even higher proportion of that money to shareholders with dividends nearly doubling over the same period to $2.36.
Elevators have been evolving fast over the last few years. The rooftop winch room is a thing of the past as a system of counterweights and high-tech motors means the equipment to pull the car up and down fits on the side. The walls have gone too, replaced by glass – like something out of Willy Wonka’s factory. But there are no ‘Vermicious Knids’ here; only a high-tech system that uses the weight of passengers to generate power on the downward journey, reducing the building’s energy bill by up to a quarter, explains Elia, who is as ebullient as you would expect an Italian national to be.
As an example of evolving technology, the Otis Gen2 elevator system features a compact gearless machine, requiring minimal machine room space, allowing for rapid installation. The innovative ReGen regenerative drive captures energy created by the elevator, feeding the energy back into a building’s electrical grid. This makes the Gen2 up to 75% more energy efficient than conventional systems with non-regenerative drives, Elia boasts.
Otis Russia is also transforming itself, keeping pace with the segment. Because of the sheer size of Russia’s residential, office and commercial real estate projects, the budgets are commensurately large, which means there is money for state-of-the-art equipment in these projects. Often building from scratch, Russian developers are looking for smart solutions in their best buildings, which are the ones that get put up first.
Otis Russia has responded by developing integrated elevator systems that are energy efficient and work with other building systems to improve the passenger experience. Architects love the new elevators, which are easier to place in a building thanks to their lower weight and machine room-less design. “The Russian segment is very interesting and we have an office in every region of the country to manage our growing business. We are also expanding our distribution network to enhance our customer service throughout the country. Business may be bit slower this year, but we in Otis are well-equipped to weather more or less favorable economic conditions,” says Elia.
“Building is going on but the priorities have changed. Now everyone is a lot more interested in energy efficiency, for example,” he says.
Like the copy machine business, the service contracts that come after the elevators are installed are an important part of the business. “We see a number of growth opportunities,” says Elia. “We are expanding in certain segments in Russia and also in Kazakhstan, Armenia, Georgia, Turkey and Tajikistan amongst other countries.”
“Otis Russia has a long-term strategic view in line with its history and legacy of innovation. It is a benchmark company. The original company was founded in 1853 and it remains a leader in safety, reliability and quality products globally. Innovation is key to our future, as we work constantly to improve the safety of existing products and to develop safer technologies for new products. Russia is important to us and we remain committed to growing in Russia,” he says.
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