Knorr-Bremse Group

Knorr-Bremse: Investments for Russian market and Production in Russia –

Experiances of an succesful and ongoing localisation

│1

Dr. Matthias Krug

General Direktor of LLC Knorr-Bremse „KB 1520“ Russia

March 2016

Knorr-Bremse Group

Agenda

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

Russia

2

Knorr-Bremse Group │3

Founded 1905

Experience 110 years of innovation

Independence family owned

Employees 23,9161

Sales € 5.2 bn1

R&D expenses 5.7 % of sales1

Investments € 161 m1

Knorr-Bremse at a glance

1 Annual Report 2014

Locations more than 100 locations in 29 countries

(80 manufacturing sites)

Two divisions both as global market- and technology leader

Systems for Rail Vehicles:

brake and on-board systems for rail vehicles

Systems for Commercial Vehicles:

brake systems for commercial vehicles and

torsional vibration dampers

Knorr-Bremse Group

Knorr-Bremse is the leading supplier for braking and on-board systems as well as

aftermarket services for the truck and railway industry

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Metros

Streetcars

Multiple units

High-speed trains

Locomotives

Passenger rail cars

Freight cars

Rail Vehicle Systems

Trucks

Trailers

Buses

Engines

Special vehicles

Commercial Vehicles

Distribution of sales 2014 per division

57%

43%

Development of sales

in € millions

254 520

740

1,494

2,743

4,241 4,300 4,303

5,206

1985 1990 1995 2000 2005 2011 2012 2013 2014

Knorr-Bremse Group CONFIDENTIAL │5

Strategic collaboration with

KAMAZ

2003 2004 1999 1997 2000 2001 2005 2006 2007 2008 2009 2012 2010

Knorr-Bremse open a

new representative

office in Moscow

Supply Air Dryer

system for PAZ on

East Europe area

First contract for the

supply with GAZ

Supply ABS

system on East

Europe market

Strategic

collaboration with

MAZ

ZB44 first

product

developed

special for East-

European

market

Strategic Cooperation

with GAZ Group

Start selling process from

warehouse based in Moscow LLC Knorr-Bremse CVS

(Moscow)

Strategic

Cooperation with

GAZ Bus Division

1st local production in Russia (LLC KB RUS,

Nizhniy Novgorod)

JV with KAMAZ - LLC Knorr-Bremse KAMA (N.Chelny )

2013 2014 2015

Direct deliveries to Mos

(June)

Monoblock for PAZ

(April)

Crankshaft machining

(April)

2011

ISO TU 16949 (November)

100.000 compressors

produced

(November)

SAP

implementation

(October)

KB RUS and KB

CVS merge

(August)

SOP compressors

for YAMZ 530

Compressor for

gas engine ISIZU

Compressor for

CUMMINS

History of Knorr-Bremse Systems for Commercial Vehicles in Russia

ISO TS 16949

Certification

(October)

Knorr-Bremse Group CONFIDENTIAL

53 pers. /чел.

12,3 mio. EUR 626,9 млн.руб. (act rate / курс 50.97)

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Site

Moscow, Nizhny Novgorod

Knorr-Bremse SfN – targets

Production

one-cylinder compressors (225cc, 320cc, 360cc belt

drive, gear drive, through drive), twin cylinder (500 cc

gear drive) compressors.

planned SOP for pedal unit, air dryer assembly, 630cc

twin cylinder through drive compressor

Производство

одноцилиндровые компрессоры (225см3, 320см3, 360см3,

с ременной передачей, зубчатой передачей, с проходным

валом), двухцилиндровые компрессоры (500см3 с зубчатой

передачей).

планируется начало производства педального узла,

сборка осушителей воздуха, двухцилиндровый компрессор

(630см3 с проходным валом).

Кнорр-Бремзе СКТ – Основные цели

Company

KB SfN LLC

Employees / Персонал

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

Main figures 2014 2015

45 pers. /чел.

Knorr-Bremse Group CONFIDENTIAL

197 pers. /чел.

60,3 mio. EUR 3 015 млн.руб. *Budget rate / курс 50

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Site

Naberezhnye Chelny Tatarstan

Knorr-Bremse KAMA – targets Кнорр-Бремзе КАМА – Основные цели

Company

KB-Kama

Employees / Персонал

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

Production

drum brakes, spider machining, dampers, disc brake

assembly, Kamaz manual SLA, master cylinder, clutch

servo, drum brakes for Kamaz trailer axle (NefAZ), KB

clutch servo (VG).

planned SOP for automatic slack adjusters, actuators,

water pump, compressor, hub and drum

Производство

барабанные тормоза, гасители, механообработка

суппорта, сборка дисковых тормозов, ручной

регулировочный рычаг, главный цилиндр сцепления, ПГУ,

барабанных тормозов для прицепов (НефАЗ), ПГУ КБ (VG)

планируется начало производства автоматических

регулировочных рычагов, тормозных камер, водяных

насосов, компрессоров, барабанов и ступиц.

175 pers. /чел.

Main figures 2014 2015

Knorr-Bremse Group CONFIDENTIAL │8

Total area (incl. offices) / Общая площадь

12 000 m2

Number of CNC machines Кол-во обраб. центров

Number of assembly lines Кол-ко сборочных линий

Location / Местоположение

NBC / Набережные

Челны

9

8

Механообработка Сборка барабанных

тормозов Сборка демпферов

Сборка регул.

рычагов Сборка главного

цилиндра Сборка ПГУ

Production / Производство

Knorr-Bremse Group

Think global - act local. Knorr-Bremse considers localization as the main key to

success

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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

Agenda

1 2 3

10

Knorr-Bremse Group Knorr-Bremse Rail Knorr-Bremse Rail in

Russia

Knorr-Bremse Group

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

Systems

Train Door

Systems

Power Electrics

Control and

Management System Auxiliary Converters

HVAC Systems

Braking Systems

Traffic Management

Systems

Platform Screen Doors

Modernization, Service and Support across the entire life-cycle

Driver Assistance

solution LEADER

CBM System Solution

│11

Knorr-Bremse Group

With Knorr-Bremse RailServices our customers are always on track

Spare parts Service Training

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OEM-quality spare parts

Spare part kits

Commonest spare parts

kept in inventory

Obsolescence

management

Maintenance and repair in

local service centers

Maintenance contracts for

entire life cycle

Technical support

Training center and on-site

training

Analysis and evaluation of

existing systems

Installation support

Retrofitting of innovative

products

Modernization/

Engineering

Modernization advice to

optimize technical and

commercial advantage

Modernization concepts

across all systems

Knorr-Bremse Group

Brake System for RUSSIAN High Speed Trains

Moscow – Kazan - ???

Knorr-Bremse Group

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

Brake control

incl. Service Brake, WSP,

DNRA, Bogie monitoring

Air supply

Bogie equipment

Doors

Air condition

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

Windshield

wipers

Brake control

Knorr-Bremse Group

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

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

Knorr-Bremse Group

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

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

Knorr-Bremse Group

The Brake Control of KB can manage brake distances, acceleration

and wheel/track adhesions as well as brake power and energy

Brake Force distribution

Thermal load

Adhesion wheel/rail

Decelerations

Failure scenario

LCC

Requirements for

Service brake

Emergency Brake

Brake architecture supporting safety and

Approval

Brake Control and Management

decela

reti

on

a [

m/s

2]

velocitiy v [km/h]

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

Knorr-Bremse Group

Agenda

1 2 3

18

Knorr-Bremse Group Knorr-Bremse Rail Knorr-Bremse Rail in

Russia

Knorr-Bremse Group

Moscow

Knorr-Bremse Rail supplys all modern train platforms in Russia and CIS with its state-

of-the art products (selected examples)

│19

Velaro RUS

Brakes

Doors

HVAC

Power Electrics

Siemens Desiro RUS

Brakes

Power Electrics

Allegro SM6

Brakes

Doors

HVAC

Power Electrics

TVZ Tver

Passenger Cars

Brakes

Stadler

Aeroexpress

Brakes

TCMS

Metro Moscow

Brakes

Doors

HVAC

Power Electrics

Stadler JV Minsk

LRV Kazan

Brakes

Doors

PESA / UVZ

Russia LRV

Moscow

Brakes, Doors

Long Distance Mass Transit R&C

Metro St. Petersburg

Brakes

Brakes

AT / EKZ

KZ8A

Brakes

Locos

AT / EKZ

KZ4A

Brakes

Knorr-Bremse Group Knorr-Bremse Group Knorr-Bremse Group

Knorr-Bremse undertook enormous efforts to extend its GOST compliant product

portfolio and develop state-of-the-art products for the Russian railway industry

│20

■ 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

Distributor brake valve

KAB60 for freight cars

Load brake valve

AKB1

for freight cars

Knorr-Bremse Group Knorr-Bremse Group Knorr-Bremse Group

Knorr-Bremse’s approach to the Russian and CIS market is based on a long-term

strategy and willingness to invest

GOST compliant product portfolio

Adaption of components to Russian requirements

Development of the distributor valve KAB60 and brake

load valve AKB1 for freight cars

Total investment: ~50 Mio. EUR

KAB60 AKB1

│21

Localization in St. Petersburg

2015: opening of new service centre

July 2016: opening of state-of-the-art production plant

(8.000sqm)

Total investment: ~60 Mio. EUR

Production plant Service Center

Knorr-Bremse Group Knorr-Bremse Group Knorr-Bremse Group │22

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

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

Knorr-Bremse Group Knorr-Bremse Group Knorr-Bremse Group

What we have learnt by building up our production in Russia?

(some experiences part II)

│23

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 Knorr-Bremse Group Knorr-Bremse Group │24

Production facility Service Center

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

■ 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

Shop floor Knorr-Bremse

production plant in Budapest

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

Localisation KAB60 & AKB1 materials from Russian suppliers

March 2016

Knorr-Bremse Group Knorr-Bremse Group Knorr-Bremse Group

Possibilities and tasks for Russian suppliers – localization program since 2008

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Knorr-Bremse Group Knorr-Bremse Group Knorr-Bremse Group

Casting & Forging: PREFFERED AND POTENTIAL SUPPLIERS

│27

MetalLitMash,

Kolomna

TS-Engineering,

Voronezh

LMZ,

Rybinsk

MLZ,

Mzensk

UAZ,

Ulyanovsk

URAL AZ,

Miass

MashSteel,

Penza

ChKPZ,

Chelyabinsk

SpezSplav,

Lysva

ZTL,

Ryazan

Knorr-Bremse Group Knorr-Bremse Group Knorr-Bremse Group

Machined Parts: POTENTIAL SUPPLIERS

│28

c

KG,

Kazan

Flaig+Hommel,

Zavolzhye Glaps Engineering,

Tver

Knorr-Bremse Group Knorr-Bremse Group Knorr-Bremse Group

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

│29

Knorr-Bremse Group Knorr-Bremse Group Knorr-Bremse Group

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

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Knorr-Bremse Group

VL80 LOCO

Modernization

• Step 1: Tap Changer

• Step 2: Further Proposals

Knorr-Bremse Group Knorr-Bremse Group Knorr-Bremse Group

Actual Solution

+

Knorr-Bremse Group Knorr-Bremse Group Knorr-Bremse Group

New Solution

TAP CHANGER

1. 30 no-load switches with single motor

2. 4 solid state switch

3. LEM for current measurement and feedback

4. TCMS & CAN BUS for configuration

5. New Kinax handle transducer

+

1.

2.

3.

4.

5.

Knorr-Bremse Group Knorr-Bremse Group Knorr-Bremse Group

Future Developments

Traction

• Driver handle

• TCMS

• TAP Changer

• Braking resistor

• DC Motor traction

Control

Auxiliary Converter

DAS

• Leader System

• Intelligent driver desk

Metering

• Ecometer

• DHS

ETHERNET Connection

Local

Train Level

Knorr-Bremse Group Knorr-Bremse Group Knorr-Bremse Group

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

Proposal Advantages

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

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

Knorr-Bremse Group Knorr-Bremse Group Knorr-Bremse Group

Knorr-Bremse Rail – Safety with Tradition

│36

Dr. Matthias Krug

General Director of LLC Knorr-Bremse „KB 1520“ Russia

March2016