Knorr-Bremse: Investments for Russian market and Production in – Experiances of an succesful and ongoing localisation

Dr. Matthias Krug General Direktor of LLC Knorr-Bremse „KB 1520“ Russia

March 2016

Knorr-Bremse Group │1 Agenda 1 2 3 Knorr-Bremse Group Knorr-Bremse Rail Knorr-Bremse Rail in Russia

Knorr-Bremse Group 2 Knorr-Bremse at a glance

Founded 1905 Locations more than 100 locations in 29 countries Experience 110 years of innovation (80 manufacturing sites) Independence family owned Two divisions both as global market- and technology leader Employees 23,9161 . Systems for Rail Vehicles: brake and on-board systems for rail vehicles Sales € 5.2 bn1 . Systems for Commercial Vehicles: 1 R&D expenses 5.7 % of sales brake systems for commercial vehicles and Investments € 161 m1 torsional vibration dampers

Knorr-Bremse Group 1 Annual Report 2014 │3 Knorr-Bremse is the leading supplier for braking and on-board systems as well as aftermarket services for the truck and railway industry

Development of sales Distribution of sales 2014 per division in € millions 5,206 4,241 4,300 4,303 57% 2,743

1,494 740 520 254 43%

1985 1990 1995 2000 2005 2011 2012 2013 2014

Rail Vehicle Systems Commercial Vehicles  Metros  Trucks  Streetcars  Trailers  Multiple units  Buses  High-speed trains  Engines  Locomotives  Special vehicles  Passenger rail cars  Freight cars

Knorr-Bremse Group │4 History of Knorr-Bremse Systems for Commercial Vehicles in Russia Monoblock for PAZ (April) First contract for the JV with - LLC Knorr- supply with GAZ ZB44 first Bremse KAMA (N.Chelny ) 100.000 compressors product produced developed (November) special for East- European Knorr-Bremse open a market Strategic Crankshaft machining (April) new representative Cooperation with SOP compressors office in Moscow GAZ Bus Division for YAMZ 530 Strategic collaboration with KAMAZ Direct deliveries to Mos (June)

ISO TU 16949 (November)

1997 1999 2000 2001 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Supply ABS Strategic Cooperation Compressor for system on East with GAZ Group KB RUS and KB gas engine ISIZU Europe market CVS merge 1st local production in (August) Russia (LLC KB RUS, Nizhniy Novgorod) Compressor for CUMMINS Supply Air Dryer Start selling process from warehouse based in Moscow system for PAZ on LLC Knorr-Bremse CVS East Europe area Strategic (Moscow) collaboration with ISO TS 16949 MAZ SAP Certification implementation (October) (October)

Knorr-Bremse Group CONFIDENTIAL │5 Кнорр-Бремзе СКТ – Основные цели Knorr-Bremse SfN – targets Company Site

KB SfN LLC Moscow, Nizhny Novgorod

Main figures 2014 2015

12,3 mio. EUR 7,9 mio. EUR Sales / Выручка 626,9 млн.руб. 534,9 млн.руб. (act rate / курс 50.97) (act rate / курс 67.52)

53 pers. 45 pers. Employees / Персонал /чел. /чел.

Production Производство  one-cylinder compressors (225cc, 320cc, 360cc belt  одноцилиндровые компрессоры (225см3, 320см3, 360см3, drive, gear drive, through drive), twin cylinder (500 cc с ременной передачей, зубчатой передачей, с проходным gear drive) compressors. валом), двухцилиндровые компрессоры (500см3 с зубчатой передачей).  planned SOP for pedal unit, air dryer assembly, 630cc  планируется начало производства педального узла, twin cylinder through drive compressor сборка осушителей воздуха, двухцилиндровый компрессор 3 (630см с проходным валом).

Knorr-Bremse Group CONFIDENTIAL │6 Кнорр-Бремзе КАМА – Основные цели Knorr-Bremse KAMA – targets Company Site

KB-Kama Naberezhnye Chelny Tatarstan

Main figures 2014 2015

60,3 mio. EUR 41,3 mio. EUR Sales / Выручка 3 015 млн.руб. 2 063 млн.руб. *Budget rate / курс 50 *Budget rate / курс 50

197 pers. 175 pers. Employees / Персонал /чел. /чел. Production Производство  drum brakes, spider machining, dampers, disc brake  барабанные тормоза, гасители, механообработка assembly, Kamaz manual SLA, master cylinder, clutch суппорта, сборка дисковых тормозов, ручной servo, drum brakes for Kamaz trailer axle (NefAZ), KB регулировочный рычаг, главный цилиндр сцепления, ПГУ, clutch servo (VG). барабанных тормозов для прицепов (НефАЗ), ПГУ КБ (VG)  planned SOP for automatic slack adjusters, actuators,  планируется начало производства автоматических water pump, compressor, hub and drum регулировочных рычагов, тормозных камер, водяных насосов, компрессоров, барабанов и ступиц.

Knorr-Bremse Group CONFIDENTIAL │7 Production / Производство

Сборка барабанных Механообработка тормозов Сборка демпферов NBC / Location / Набережные Местоположение Челны

Total area (incl. offices) / 12 000 m2 Общая площадь Number of CNC machines Кол-во обраб. центров 9 Number of assembly lines Сборка регул. Сборка главного 8 Сборка ПГУ Кол-ко сборочных линий рычагов цилиндра

Knorr-Bremse Group CONFIDENTIAL │8 Think global - act local. Knorr-Bremse considers localization as the main key to success

 With more than 100 sites in 29 different countries, Knorr-Bremse is represented on all continents  Knorr-Bremse’s global production network consists of 80 state-of-the-art manufacturing sites  Knorr-Bremse has a strong global footprint and a proven track record in localizing its technologies worldwide  Localization guarantees customer proximity and a profound understanding of customer needs as well as high reactivity and flexibility  Knorr-Bremse enforces globally applied and standardized processes as the basis for equally high quality standards and efficiency in all locations worldwide

Knorr-Bremse Group │9 Agenda 1 2 3 Knorr-Bremse Group Knorr-Bremse Rail Knorr-Bremse Rail in Russia

Knorr-Bremse Group 10 Knorr-Bremse Rail is the leading global system supplier for the railway industry, providing a broad portfolio of sub-systems and matching service solutions

ON TRAIN OFF TRAIN

Wash and Wipe Train Door Power Electrics HVAC Systems Traffic Management Systems Systems Systems

Driver Assistance Braking Systems Auxiliary Converters Control and Platform Screen Doors solution LEADER Management System

Modernization, Service and Support across the entire life-cycle CBM System Solution

Knorr-Bremse Group │11 With Knorr-Bremse RailServices our customers are always on track

Spare parts Service Training Modernization/ Engineering  OEM-quality spare parts  Maintenance and repair in  Analysis and evaluation of  Modernization advice to  Spare part kits local service centers existing systems optimize technical and commercial advantage  Commonest spare parts  Maintenance contracts for  Installation support kept in inventory entire life cycle  Retrofitting of innovative  Modernization concepts across all systems  Obsolescence  Technical support products management  Training center and on-site training

Knorr-Bremse Group │12 Brake System for RUSSIAN High Speed Trains

Moscow – Kazan - ???

Knorr-Bremse Group 07506N00 - Moscow/Kazan, Brake System for Russian High Speed Trains

KB‘s Concept and Scope offered for Moscow/Kazan HST

Air condition

Doors Brake control

Windshield wipers

Air supply

Bogie equipment

Brake control incl. Service Brake, WSP, DNRA, Bogie monitoring

Knorr-Bremse Group 07506N00 - Moscow/Kazan, Brake System for Russian High Speed Trains

Knorr-Bremse has a profound experience of requirements for Russian railway vehicles

 System  HST Application 380km/h

 Standards  GOST  NBzhT  WSP  Certification

 Others  Material qualifications  Severe winter operation  Compatibility with existing stock and Depot/Service

Knorr-Bremse Group

07506N00 - Moscow/Kazan, Brake System for Russian High Speed Trains

Simulation of the Brake system functions and components are requested

 Test of SW-Brake function  Communication  Brake Blending  Brake test

 Test of pneumatic behavior  Response times  Functionality

 Dynamometer Tests  Validation thermal calculation  Friction coefficient  Simulation track profile

Knorr-Bremse Group

07506N00 - Moscow/Kazan, Brake System for Russian High Speed Trains

The Brake Control of KB can manage brake distances, acceleration and wheel/track adhesions as well as brake power and energy

Brake Control and Management  Brake Force distribution

 Thermal load

 Adhesion wheel/rail ] 2  Decelerations  Failure scenario  LCC

 Requirements for [m/s a decelaretion velocitiy v [km/h]  Service brake  Emergency Brake

 Brake architecture supporting safety and Approval

Knorr-Bremse Group Agenda 1 2 3 Knorr-Bremse Group Knorr-Bremse Rail Knorr-Bremse Rail in Russia

Knorr-Bremse Group 18 Knorr-Bremse Rail supplys all modern train platforms in Russia and CIS with its state- of-the art products (selected examples) Velaro RUS Metro St. Petersburg Brakes Moscow Brakes Doors Brakes HVAC Power Electrics

Allegro SM6 AT / EKZ Metro Moscow Brakes KZ4A Brakes Doors Brakes Doors HVAC HVAC Power Electrics Power Electrics

Siemens Desiro RUS AT / EKZ Stadler JV Minsk Brakes KZ8A LRV Kazan Power Electrics Brakes Brakes Doors

TVZ Tver Stadler PESA / UVZ Passenger Cars Aeroexpress Russia LRV Brakes Brakes Moscow TCMS Brakes, Doors

Long Distance R&C Mass Transit Locos

Knorr-Bremse Group │19 Knorr-Bremse undertook enormous efforts to extend its GOST compliant product portfolio and develop state-of-the-art products for the Russian railway industry

Load brake valve AKB1 for freight cars

Distributor brake valve KAB60 for freight cars

■ Engineering Cooperation between RZD and Knorr-Bremse for freight cars: Development of the Distributor Valve and Brake Load valve for Freight Trains

■ Adaption of components to Russian requirements (e.g. Low temperature adaptation down to -55°C)

■ Accreditation of KB to the Test Centre in Russian System SSFZhT

Knorr-Bremse Group │20 Knorr-Bremse’s approach to the Russian and CIS market is based on a long-term strategy and willingness to invest

Service Center Production plant

KAB60 AKB1

GOST compliant product portfolio Localization in St. Petersburg  Adaption of components to Russian requirements  2015: opening of new service centre  Development of the distributor valve KAB60 and brake  July 2016: opening of state-of-the-art production plant load valve AKB1 for freight cars (8.000sqm)  Total investment: ~50 Mio. EUR  Total investment: ~60 Mio. EUR

Knorr-Bremse Group │21 What we have learnt by building up our production in Russia? (some experiences I )

 Certification procedure has to be organized easier

 the infrastructure for the production doesn’t come in the right time: the plant is built, but there are no streets, electricity and gas near the building

 the possibilities for Russian suppliers: suppliers have to have interest to be presented on the global market especially CIS and to work in international business competition conditions

 international market leading products have to be the target for development of Russian industry

 an open question: how to manage working without an import when there is no technology provided? How Russian Federation can integrate technology partners from abroad as partners in this case?

 total quality management (TQM) need to be integrated in the whole value added process – leadership needs to be taken by entrepreneurs

Knorr-Bremse Group │22

What we have learnt by building up our production in Russia? (some experiences part II)

 Investors are not enough prepared for doing business in Russia  Investors have to invest always more time than excepted  Russian business environment is not comparable to China or Europe  long going presence and partnership are business success factors  Respect culture, history and tradition  The decision for the place of localisation should be a decision of the investor

Knorr-Bremse Group │23

The construction of a new state-of-the-art production plant and service centre in St. Petersburg is a clear commitment to the Russian market

Production facility Service Center

Shop floor Knorr-Bremse production plant in Budapest

■ The contracts signed on 05th of August 2014 ■ Service center in St. Petersburg started operations in February 2015 ■ A state-of-the-art production facility (8.000 sqm) was inaugurated in St. Petersburg by end of 2015 after 16 months

Knorr-Bremse intends to bring best in class / top modern production plants to Russia and build up a tier 2 supplier base

Knorr-Bremse Group │24 Localisation KAB60 & AKB1 materials from Russian suppliers

March 2016

Knorr-Bremse Group Possibilities and tasks for Russian suppliers – localization program since 2008

Knorr-Bremse Group │26 Casting & Forging: PREFFERED AND POTENTIAL SUPPLIERS

SpezSplav, Lysva LMZ, Rybinsk

ChKPZ, MetalLitMash, Chelyabinsk Kolomna

URAL AZ, UAZ, Miass ZTL, Ulyanovsk Ryazan

MLZ, Mzensk MashSteel, Penza

TS-Engineering, Voronezh

Knorr-Bremse Group │27 Machined Parts: POTENTIAL SUPPLIERS

Flaig+Hommel, Zavolzhye Glaps Engineering, Tver

KG, Kazan

c

Knorr-Bremse Group │28 Some ideas for improvement of performance of Russian suppliers for CIS and global markets 1.  Customer satisfaction is not always in mind of management, sales and production staff

2.  Production facilities are not in the best condition

3.  Quality awareness has to be on higher level

4.  Reaction time needs to be shorter in all steps of production

5.  Communication to customer needs to be understood as a key success factor

  Prices are not competitive because of philosophy of mass production - SMED and „one piece flow“ as solutions

 Supply chain and inventory management create cash for investments

Knorr-Bremse Group │29

Support for russian foundries with german pattern maker and know-how transfer

• 3-D-files for all parts to russian foundries • Support in Russia by german pattern maker • Production of pattern and coreboxes in Germany • Training from german engineers in russian foundries • Audits by KB-Engineers

Knorr-Bremse Group │30 VL80 LOCO Modernization

• Step 1: Tap Changer

• Step 2: Further Proposals

Knorr-Bremse Group Actual Solution

+

Knorr-Bremse Group New Solution

TAP CHANGER

1. 30 no-load switches with single motor 1. 2. 4 solid state switch 3. LEM for current measurement and feedback 4. TCMS & CAN BUS for configuration 5. New Kinax handle transducer 2. +

4. 3.

5.

Knorr-Bremse Group Future Developments

ETHERNET Connection Metering Local • Ecometer • DHS Train Level

DAS • Leader System • Intelligent driver desk

Traction • Driver handle Auxiliary Converter • TCMS • TAP Changer • Braking resistor • DC Motor traction Control

Knorr-Bremse Group Proposal Advantages

Availability • Contactors and Disconnectors designed to work 8 years without maintenance • Electronic Diagnostics to prevent major loco failures • Current control for Traction Motor and gear box life improvement • Corrective maintenance time reduction

Maintenance time reduction • Commutation of contactors assisted by static switches • Easy access to every single component without disassembling the Changer (easy maintenance in situ without removing the full TAP Changer from the loco) • Replacement of camshaft and Motor Drive with multiple Permanent magnet motors solution • Use of Electronic to control the Changer (reduction of wiring and possibility of future integrations) • Reduction of number of auxiliary contacts with new simplified driver handle

Cost saving solution • Use of standard contactors from the catalogue • Less number of components • Reduction of copper connections (main connections in Aluminum bars; aux wiring removal)

Weight reduction • Removal of the big motor and camshaft • Reduction of dimensions • From 1015kg to 630kg

Knorr-Bremse Group Knorr-Bremse Rail – Safety with Tradition

Dr. Matthias Krug General Director of LLC Knorr-Bremse „KB 1520“ Russia

March2016

Knorr-Bremse Group │36