“The cooperation with Gefco allows us to reach a more efficient use of rolling stock,” said Bogdan’s president Oleg Svinarchuk. The companies are also looking at the possibility of establishing a joint venture.
Bogdan is one of the largest vehicle makers in the Ukrainian market and has annual assembly capacity for between 120,000-150,000 at its factory in Cherkasy, where it builds Lada, Hyundai and Bogdan brand commercial vehicles.
The company said the move is intended to help make its logistics division profitable again following losses last year that amounted to UAH 9m ($1.09m).
“This happened in particular because when we supply Hyundai cars from Russia our transporters are loaded in one direction only,” said a spokesperson for Bogdan. “The same thing also happens in the domestic market sometimes. Now Gefco will look for customers in order to achieve a better use of our equipment and warehouses.”
According to the spokesperson, the decision to work with Gefco should help stabilise prices for cars on the domestic market.
The deal with Bogdan follows the outsourcing of GM Europe’s inbound and outbound logistics management to Gefco, which went into effect on April 1st this year across Europe, Russia and Turkey following an alliance agreement between GM and PSA, Gefco’s former majority owners (read more here). GM and Gefco have said that they expect to fill more empty backhauls and combine logistics to make savings.
However, industry commentators in Ukraine are warning that Bogdan’s logistics outsourcing could be risky and expensive. The move is seen as an unusual one because Ukrainian companies are often wary of divulging information about their operations and tend to resort to outside assistance only in exceptional cases.
"Our companies manage all the logistics on their own, starting from brokers and ending with the customs warehouse,” said Sergey Borovik, marketing director for consultancy AIS Group in Ukraine. “The transfer to outside companies of your own logistics will make it more expensive. Also there is a risk that the strategy of the company may become known to competitors,” he noted.
Rival Ukrainian vehicle maker ZAZ expressed a similar opinion. Its chairman Nicholas Evdokimenko explained that parent company UkrAVTO has a forwarding company and that ZAZ owns the transport division. The two interact to ensure that following the import of automotive components, the transport does not return empty.
“In addition, our companies provide services to other businesses,” said Evdokimento. “All this allows us to operate profitably. But, for example, to send and receive parts or finished products to the EU and vice versa we hold a tender for the logistics company. We have 40 transport units, but [they] can only operate within the borders of CIS.”
Despite these reservations, Gefco said it was confident that cooperation with Bogdan would be successful.
“The cooperation agreement with a leading car manufacturer in Ukraine is a landmark and opens broad prospects for us,” said Jerome Chevrolet, general manager of Gefco Ukraine. “We will make every effort to ensure the combination of Gefco’s many years of experience and know-how and Bogdan’s numerous facilities will give the impetus for the development of the automotive industry of Ukraine.”