TURKMENISTAN: ZEPPELIN'S CATERPILLAR DEALER

C O N F I D E N T I A L ASHGABAT 001193

SIPDIS

STATE FOR SCA/CEN; EEB; NEA/IR
ENERGY FOR EKIMOFF/BURPOE/COHEN
COMMERCE FOR EHOUSE

E.O. 12958: DECL: 09/17/2019
TAGS: PGOV EINV EIND ETRD TX
SUBJECT: TURKMENISTAN: ZEPPELIN'S CATERPILLAR DEALER
DOWNBEAT ON BUSINESS

REF: ASHGABAT 1153

Classified By: Charge Sylvia Reed Curran for reasons 1.4 (b) and (d).


1. (C) On September 16, Economic Officer met with
German-based Zeppelin's General Director Oleg Sarmin to
discuss the construction machinery market in Turkmenistan,
given the large number of construction projects underway in
the country. Zeppelin is the only dealer in country
authorized to sell U.S.-made Caterpillar machinery. Zeppelin
opened its large facility close to the Ashgabat airport in
2003, after the late Turkmen President Niyazov signed a
seven-year contract with the company. Sarmin admitted that
Zeppelin Turkmenistan has seen better days, in terms of
selling Caterpillar construction machines. He stated that
Ashgabat was full of multimillion dollar construction
projects, but Turkish and French construction companies were
not buying Caterpillar. He added that Japanese-made Komatsu
and Russian-made machinery was very popular with the Turkish
construction giant Polimeks and the French construction
company Bouygues. Sarmin noted that two years ago his office
had 120 employees, while today there are only about 80
employees, due to Caterpillar's declining sales.


2. (C) The Zeppelin General Director contributed his
company's waning business to increased competition, and a
lack of skilled construction workers capable of successfully
operating and maintaining Caterpillar equipment. Sarmin
explained that Caterpillar, unlike the Japanese and Russian
machinery, is computer-based and more high-tech. As a
result, machinery operators need to have fairly high-level
operational skills and they need to ensure that heavy machine
oil and other lubricants do not spill onto the computerized
equipment. He lamented that the Turkmen will not invest in
additional training for its machinery operators, and prefer
"simple" machinery that "you can dump tons of oil and grease
on and it will not stop running." He added that Zeppelin's
contracts to provide construction equipment to the Turkmen
government were up in 2010, and given Caterpillar's
high-maintenence reputation, he was not confident that
Zeppelin was still the government favorite.


3. (C) Sarmin noted that Zeppelin's biggest competitors were
Komatsu and European competitors that he did not name
specifically. He felt that the Austrian-based IPC/EuroTech,
which is a dealer for several agricultural and construction
machinery companies in Turkmenistan, had the inside track
with the GOTX, and as a result, was winning more and more
contracts for its companies (reftel). (Note: IPC has also
invested a lot of money in training and maintenance programs,
as well as having a reputation for being able to procure and
deliver coveted spare parts easily. End Note.)


4. (C) COMMENT. Zeppelin Turkmenistan enjoyed seven years of
government contracts for high-quality Caterpillar equipment.
Under President Niyazov, Caterpillar was the Turkmen
construction machinery of choice. Zeppelin's manager
admitted that the current Turkmen President looks at the
competitiveness of the machinery in addition to a product's
brand name. In addition, Zeppelin has not yet provided the
Turkmen with quality operational and maintenance training
that its competitors are more than willing to do. With new
government contracts to be opened for bidding in 2010, it is
unclear whether Zeppelin can regain Turkmen confidence in
Caterpillar construction machinery in such a competitive
sector. END COMMENT.
CURRAN