European Bearing And Amsted Rail In Joint Venture

European Bearing Corp. (Russian Federation) and Amsted Rail Corp. (USA) have formed a joint venture to manufacture and distribute cartridge roller bearings to the fast-growing rail market in Russia and the former Soviet territories now referred to as the Commonwealth of Independent States (CIS). Although Amsted / Brenco is the latest bearing manufacturer to join the fray in Russian rail, rumors of the linkup have been circulating for several months. Amsted / Brenco establishes itself with a clear advantage by teaming with the largely-closed market's key player in EBC. The joint venture will assemble, produce and distribute cartridge tapered roller railway bearings. All of the CIS rail systems are on conversion programs for their wheel bearings; changing from Russian-produced plain bearings to modern cartridge roller bearings. EBC-owned divisions have been the primary suppliers of the new bearings. By mid-2008, the companies expect to be assembling and distributing bearings, and in full-cycle production a few months later. Amsted Rail is the parent company of Brenco, Griffin Wheel. and ASF-Keystone. Brenco is the bearing manufacturing division, and is the leading bearing supplier for new railcars in the United States with a 60% market share. In 2006, Amsted acquired a separate subsidiary, OOO Transolutions CIS, which now represents its interests in the CIS region. Its directive, "is establishing significant efforts to develop strategic partnerships and other cooperative initiatives to produce its proprietary technology in Russia and the CIS to raise quality and performance in the railway sector to new levels." With not only massive investment in building new rail systems across Russia and the CIS, there is also the added incentive that those rail systems are converting older rolling stock wheels from plain bearings to the latest tapered roller cartridge bearings. Brenco said it is working to create a series of bearings for use on 1520 mm gauge railroads. The company???s 130x230x150 mm bearings have been granted certificates from the Registry for Certification at the Federal Railway Transport (Russia), and from GOST R (Russia), and are also certified in the UkrSEPRO System (Ukraine). The relationship with European Bearing Corp. will advance Brenco's timetable immeasurably, and give it fast-lane access to those promising sectors. Meanwhile, EBC contributes its manufacturing capacity via the Stepnogorsk bearing plant, and more importantly, its unparalleled access to upper-level government decisionmakers across the Russian and CIS rail systems. EBC is Russia's largest bearing producer and completely dominates the CIS rail bearing market with a self-reported 90%+ market share. Its Stepnogorsk plant employs more than 2,100 workers and pumps out more than 3 million rail bearings each year. Last year, production constraints prompted EBC to announce an expansion program for Stepnogorsk. In June 2007, HARP revealed an aggressive expansion plan for its Kharkiv Bearing Plant, the second-largest rail bearing supplier in Russia after EBC Stepnogorsk. Kharkiv Bearing Plant currently produces in the range of 600,000 rail bearings each year. SKF entered the fray in late 2007, announcing it will also build a rail bearing factory outside Moscow. It is scheduled to come online in September 2008 and will also offer rail bearing reconditioning services. Back in 2002, INA became involved with EBC's Stepnogorsk rail bearing plant. Recently, but likely uncoincidentally, Russian media reported highly-connected billionaire mogul Roman Abramovich has acquired 50% of European Bearing. Oleg Savchenko, EBC's primary owner, said: "This cooperation between Amsted Rail and European Bearing Corporation give us confidence that in the near future our joint venture will become one of the most efficient producers in the railway industry, not only within the CIS, but also throughout the world."

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