President of the HSW: We’ve Accelerated Production and R&D Works

Jędrzej Graf: During the Kielce defence industry exhibition HSW has demonstrated its Borsuk infantry fighting vehicle, for the second time. After it enters service, it is to replace the obsolete BWP-1 platform in the military. What is the difference between the Borsuk IFV presented today, at MSPO, from the previous vehicle, and when can we expect series manufacturing?

Bernard Cichocki, HSW S.A. President of the Management Board: The Borsuk New Amphibious IFV is being built within the framework of a development study that, according to the timeline in force, shall be finalized until the year 2020. Only then will we be able to talk about launching series production and supplies, once a proper agreement is reached with the Ordering Party. As for now, I assume that the study would be completed on the assumed date, I see no threats here. We must remember though that the R&D initiatives have their specific nature, and during the research some issues may emerge requiring changes for instance.

I’d like to add that before the MSPO exhibition, we have finalized an important test phase involving the Borsuk model, covering, among other areas, the first amphibious and traction tests. I would like to stress the fact that the model presented this year is very close to an actual prototype, and appearance-wise the final product shall not differ significantly. When it comes to the weight distribution it features all of the elements of the target vehicle, coming either in a form of the specific equipment or a mass equivalent. Borsuk, in a form demonstrated last year, was much more modest, for instance it had no side skirts.

After the MSPO exhibition the vehicle is entering another, very advanced stage of testing. We hope that it will be successfully finalized which should pave the way for further work directed towards completion of the R&D phase and then initiation of series manufacturing.

ZSSW-30 unmanned turret is the primary armament of Borsuk, however, first it is destined to be mounted on the Rosomak APC. How does this project progress?

Right after the MSPO exhibition the turret would undergo qualification tests which are the last stage of the R&D study. We hope that at this stage we will be able to begin negotiation with the Ordering Party, concerning the ZSSW series production agreement. We assume that the qualification would be finalized early next year. Then we will be finalizing the contract related to series supplies. We hope that we will be able to begin production of the ZSSW turrets ordered by the Polish Ministry of Defence by the end of this year, so that we are able to deliver the first examples to the soldiers next year.

Both the Borsuk IFV, as well as the unmanned turret, are being built by HSW working with external entities. How do you assess the cooperation with the PGZ Group partners and with partners not belonging to the Group, such as WB Electronics for instance?

Huta Stalowa Wola acts as the consortium leader, both in the Borsuk IFV initiative, as well as in the unmanned turret programme. This requires a significant involvement on our part, also to coordinate the actions undertaken by the members of the consortium. I am satisfied with cooperation with the individual partners, however, depending on the specific conditions, it has its own individual nature. Everyone is driven however, to offer and deliver solutions that would make it possible to implement the work phases on time. Cooperation as such gets us closer to getting the final products which is the ultimate goal here.

We cooperate both with the PGZ Group companies, as well as with the external entities - WB Electronics above all. I would like to emphasize it once again: my assessment of cooperation with all of the partners in the turret and ZSSW programmes is positive.

This year’s edition of the MSPO event is taking place on the occasion of the HSW’s 80th anniversary. The facility underwent a difficult restructuring process, but now investment progresses, new products are being introduced. What key factors led to a situation, in your opinion, in which HSW succeeded despite numerous difficulties, within the framework of long-running transformation, in maintaining and expanding its production capacity?

Throughout the 80 years of its history HSW went through numerous difficult moments, both recently, as well as before, at the earlier stages of activities. Carrying out several R&D projects had a key meaning for HSW to survive and thrive in development that we’re observing today. Even though these projects had differing stages of advancement, they were also giving a realistic chance of finalization. Thanks to these initiatives HSW also maintained capabilities to carry out new projects. This made it possible for us to accelerate the works on creating new products - today these projects have already been finalized and the products are being delivered to the Polish Armed Forces already. One may state that without the R&D potential continuation of the HSW’s business activities would be endangered.

I shall also recall that HSW nowadays includes primarily the former Centre of Military Production dealing with special-purpose manufacturing. Meanwhile, the civil portion of the company has been sold within the framework of restructuring. From the current point of view this step may be interpreted in many different ways, as HSW had a huge potential, it was employing several-fold more people, it also had a wider range of commercial products available. If at least some of civil production was still associated with HSW, the business of the company could be planned and shaped more flexibly and more effectively. 

This does not change the fact that maintaining the ability to continue the R&D initiatives was, in my opinion, of greatest importance for HSW to survive as a manufacturing enterprise. If HSW had no products that could gain the interest of the Ordering Party, no recovery or effectiveness enhancement programmes would be efficient. Thanks to the above we could have prepared the facility to recover its manufacturing capacity.

R&D works often last for years.

Yes. It could have been to late to begin the R&D work at the moment when restructuring was taking place, as creating new products always takes a certain period of time - this is the specific nature of the R&D works. The fact that HSW had its products made it possible for us to take some steps towards enhancement of the economic-financial situation of the company, healing of the cashflow and recovery of the profitability. 

I yet again stress the fact that the ongoing R&D efforts were at their initial stage at the time. The Borsuk IFV contract was signed back in 2014, but the largest portion of work has been in implementation since around 2 years. We also accelerated the unmanned turret programme, while signing the Wisła programme agreement made it possible for us to take specific steps towards implementation of this project.

What were the other elements of the restructuring process introduced at HSW?

Today we’re employing new employees and increase pay at HSW. However, the road towards the stage at which we’re now went through a couple of tough moments. Temporary sacrifices were required on the part of the employees, among other measures. A variety of processes and systems functioning at the company underwent fixing. Here I am referring to the issue that was largely neglected in the past: accounting liquidity and profitability. 

Earlier on, even if the company was awarded with a significant order, this did not ensure safe continuation of its business activities. We had to radically cut the costs, also by renegotiating the agreements we had with our suppliers. We also had to amend the cost structure. We have accelerated the R&D and production work tempo which impacted on the effectiveness of the company in general. Thanks to the above we are working on the agreements in line with the provisions and on time.

How does the relationship with the trade unions look like at HSW? They are usually strong, by heritage, in the state-driven defence industry.

We understand the role of the trade unions and we mutually cooperate in the areas that are the domain of theirs. We must remember however, that the dialogue with the social side may become an obstacle on the way towards enhancement of the company’s effectiveness. We are trying to shape our relations in a way that would not bend this rule. At HSW we usually succeed here. 

Krab self-propelled howitzers are a flagship product of the HSW company, being built within the Regina program. Implementation of the said project, in its current shape, was possible following a decision made back in 2014, to transfer the technology of the Korean chassis. What is your view of this choice, looking at it with a today’s point of view?

First, I would like to recall the fact that the Regina programme is in the series production stage already. A relevant PLN 4.5 billion worth contract has been concluded back in 2016. By the end of this year we are planning to deliver the elements of the first series manufactured Regina Squadron Fire Module element to the military. I would like to recall the fact that the first “implementation” module has been, in its entirety, in service, since 2017.

Referring to the issue of the chassis - the platforms used now in the Regina programme are rated well both by the user, as well as by the market. The advanced technologies and transfer of those technologies enhances the expertise available at HSW. The chassis utilized earlier had caused technical problems that delayed the programme. 

The K9PL chassis also offers a significant potential for being used outside the Regina programme, while the license agreement makes it possible for us to manufacture this platform for other purposes indicated by the Ordering Party. We hope that, in the future, it could also be used as a base for other systems, such as self-propelled anti-aircraft systems.

The HSW company also develops other “Artillery” class products – Kryl howitzer or Langusta II launcher. What are the most important plans, when it comes to these vehicles? Do you see interest in case of the Ordering Party?

We are continuing to develop new products, but we must remember that this process is complex and complicated. We notice that there’s interest emerging in case of the Polish Ministry of Defence and the Armed Forces. Should it become tangible, we’re ready to deliver new products. 

If the new turret and Borsuk projects are finalized successfully, HSW would face a need to significantly boost its production. What are the further investment plans made by the company?

Throughout the last several months we’ve begun investment in an amount exceeding PLN 60 million. We are focusing on expansion of a robotized production line at the new hall. The production line is going to be utilized for the purpose of welding the turrets for the three key products: Krab howitzers, Rak mortars and ZSSW-30 remote turret systems. Apart from that, the facility is going to manufacture hulls for tracked vehicles, including the future Borsuk IFVs.

Expansion of the barrel manufacturing facility is another very important area of development of the HSW’s manufacturing capacity. There the key elements of the Krab and Rak artillery systems are made. In the nearest future we are also going to launch, I hope, manufacturing of the 30 mm barrels for the Bushmaster II cannon. We are also expanding the external infrastructure of the facility. We’ve acquired the area where a track that is going to be used to technically test our products is being built. 

Thank you for the conversation.