Siemens Ukraine sells everything that Ukraine acutely needs to become prosperous: more and cleaner energy, modern infrastructure, state-of the-art manufacturing, efficient heating, cooling and lighting systems for all buildings; better diagnostic equipment for health care. The list goes on and on.
“Ukraine needs huge modernization in industry and infrastructure,” Siemens Ukraine country manager Maciej Tomasz Zielinski to the Kyiv Post in an interview this month from the company’s headquarters. “This is exactly what Siemens delivers. We create value chains for our customers in electrification, digitation and automation.”
The German-based company’s technological wizardry in 2017 earned $83 billion in global revenue and $6 billion in net profit with 376,000 employees.
In Ukraine, however, a rebounding business in 2017 earned only $80 million in revenue – less than 1/10 of 1 percent – with 250 employees in five locations.
Still, the Polish citizen who has been in Ukraine for more than two years, said “things nowadays are going quite well” compared to 2015, when Siemens had to evacuate its Donetsk office, and 2016, the year that Zielinski arrived to a severe downturn in business, saw no working streetlights in parts of Kyiv and heard shooting on the outskirts of Mariupol during a business trip.
The hardships, of course, came in the aftermath of the EuroMaidan Revolution that drove Kremlin-backed President Viktor Yanukovych from power on Feb. 22, 2014, triggering Russia’s military invasion and occupation of Crimea and parts of the Donbas, which continues today.
“Since then, things have changed a lot,” Zielinski told the Kyiv Post from Siemens’ modern 8th floor headquarters in the Astarta Business Center in the Podil neighborhood. “I have to say the last two years were very successful for the whole Siemens Ukraine team. When you talk about Ukraine, you don’t have super big projects, but still, for such a country, projects of the volume of 10 million euros are not small projects.”
Big and small customers
It’s not surprising that big oligarch-owned private companies, as well as large state companies, are customers of Siemens Ukraine. They can afford the company’s services.
The roster of clients includes Victor Pinchuk’s InterPipe; Rinat Akhmetov’s DTEK and Metinvest; ArcelorMittal, the nation’s largest steel mill; and UkrEnergo, operator of Ukraine’s electrical power grid.
But Zielinski said that the majority of customers are medium-sized companies who need automation and better electrical equipment to improve their efficiency and optimize costs.
“Cost-cutting is not just about labor costs,” Zielinski said. “It’s about the whole value chain: to produce goods with quality and effectivity, you have to invest in production. We see people are investing more and more in modern technology.”
Despite the small footprint that the Ukrainian outfit has in Siemens global sales, Zielinski said that the company has never considered closing the country office.
Its roots in Ukraine run very deep.
“We have been in Ukraine 166 years. We have been involved in the electrification of the trams in Kyiv, the lighting systems in Kyiv, Lviv, and Odesa and the telegraph lines to Simferopol,” Zielinski said. “The question is about developing and finding the business models that will be successful and sustainable in the longer-term perspective.”
About 40 employees in Kyiv deliver services for other Siemens entities from its engineering hub.
Zielinski said Ukraine is ideally located for such an innovative hub for three big reasons: a highly educated workforce, reasonable costs and close proximity to European and other markets.
What Ukraine needs
But for Siemens to develop its business, Ukraine needs to develop as a country.
“Ukraine has the potential,” he said “It needs some PR as well,” which investment promotion and branding initiatives such as Ukraine Now are helping.
Beyond PR, “it should have a transparent judicial system. It should fight corruption,” Zielinski said. “If the country provides transparent and clear conditions for business, the business will come.”
While ProZorro, an online system designed to make government purchases more competitive and transparent, is an improvement, Ukraine cannot “sit on its laurels and say we have ProZorro, so everything’s fine. Someone has to control the processes in ProZorro, whether you give the same terms and conditions to all vendors.”
Additionally, “what is needed is privatization of the public sector,” Zielinski said. “There’s no reason that some producers of some mechanical parts are still owned by the state. Then step-by-step the investors will be coming.”
The outmigration of Ukrainian labor to such nations as Zielinski’s native Poland, where up to 2 million Ukrainians live, is a problem that needs to be addressed by business and government. In the short term, he said, the exodus puts upward pressure on salaries, faster than the economy is growing.
Educating workers
Besides providing jobs, Siemens is countering Ukraine’s brain drain through education initiatives to help power Ukraine’s digital transformation.
“We need to improve skills,” he said. The start is a Siemens education center, a “digital laboratory, wholly equipped and designed by Siemens” at Lviv Polytechnic National University.
“This was our pilot project,” he said, of the effort that will likely involve branching out into other institutes around Ukraine.
What does Siemens do?
Siemens has such a vast array of complex, high-tech products that it’s hard to know where to begin.
But even in Ukraine, where Siemens does business on a smaller scale compared to other nations, the products and services are woven into everyday lives and the nation’s economy.
In most hotels and modern office buildings in Kyiv, Siemens’ sensors automatically control lighting, heat and fire alarm systems and let the customer change settings remotely.
On roads, Siemens’ technology controls signal lighting systems to make traffic run more smoothly.
In power supply, Siemens’ software and hardware helps the nation’s electrical grid deliver energy more efficiently. Also in energy, Siemens technology is used in oil and gas exploration as well as the budding renewable sector of wind and solar.
In factories, automation and drive systems modernize and improve production and efficiency.
In food and beverage, Siemens’ technology is used in storage elevators and other infrastructure, as well as in production of such things as edible oil. It even is involved in burning waste from sunflower grain to produce steam that powers turbines.
Recently, Siemens signed a memorandum of understanding with Turboatom in Kharkiv to explore more business opportunities.
But Siemens could do much more, if the private and public sectors in Ukraine find the to invest.
Ukrzalyznytsia, the state railway monopoly with twice as many kilometers of track than Germany, “needs electrification” to deliver people and goods more quickly, efficiently and profitably, he said. Siemens specializes in electrical locomotives, which could replace more of Ukraine’s aging diesel locomotives and rolling stock.
“We deliver equipment for signaling, electrification and rolling stock as well,” he said. “We have the complete portfolio, not only in rail. When it comes to infrastructure, there’s plenty to do in Ukraine…In Ukraine, this is about priorities.”
Even before production takes place, Siemens — as the “biggest industrial software producer worldwide” — has visualization systems to great a “digital twin” prototype of the product under development.
“If something is wrong, you can change the features of the product. Nowadays, most (things under) productions have their own digital twin,” he said. For example, computers can simulate the impact of crashes on car bumpers, helping automobile manufacturers create “the right product.” (It’s not very applicable to Ukraine since fewer than 5,000 cars are produced in the country annually.)
In terms of investment, Zielinski is seeing a lot more activity in oil and gas production. He thinks the food and beverage industry is poised for growth. And he also believes that renewable energy will create more decentralization in that sector. Construction is back on the rise in Ukraine, he said, primarily in the residential sector, creating opportunities for Siemens’ automated heat, lighting and safety systems.
Getting past controversy
Siemens has had to navigate political controversies, most seriously, from Ukraine’s standpoint when the company’s turbines ended up in Kremlin-occupied Crimea in violation of international trade sanctions. Siemens weathered the controversy, insisting that the turbines were meant for the Russian mainland, and weren’t supposed to be transferred to the Ukrainian peninsula.
Many in Ukraine find the explanation implausible, but Zielinski said Siemens did nothing wrong, as CEO Joe Kaeser explained to Foreign Minister Pavlo Klimkin in person.
“Siemens took the legal action against the company that delivered the turbines and lost in court, but also took additional measures to prevent such situation in the future,” Zielinski said, especially in working with state-owned energy companies in Russia. “This is how the things were.”
Another dust-up came when Naftogaz head Andriy Soboloyev last year said that Siemens, under pressure from Russia, did not want to sell equipment to Ukraine’s state-owned Naftogaz energy monopoly. “There were business reasons we didn’t come to an agreement,” Zielinski said. He said he “cannot even imagine” Siemens would not do business in one country because of pressure from another country.
Siemens, however, had a major scandal and paid large fines in the early 2000s after settling cases of alleged bribery. It led to a major transformation within the company.
“We are a company with the values of integrity,” Zielinski said. “Our aspiration is to serve the customer the best we can. We are always compliant with rules and regulations. We have instilled an ownership culture. If you feel yourself as the owner of the company, you never go for dirty business and you behave with responsibility. I can guarantee you we don’t have any corruption issues in Ukraine. This is not a strategy or tactic. This is the foundation of our activities.”
Charter of Trust
Siemens and other companies globally are spearheading the Charter of Trust movement to improve awareness of the importance of having excellent cybersecurity, another service that the company provides. Some are high-tech solutions, while others are common sense: shutting down computers not in use and not writing down passwords.
“The charter of trust is to emphasize how important cybersecurity is and to set the measures with other companies to exchange knowledge and creat standards,” he said.
First time in Ukraine
Zielinski, 44, who is also an elected member of the European Business Association, has a mechanical engineering background and had never worked in Ukraine before this assignment. But he’s worked in Poland and Russia since joining the company in 2003.
He got a master’s degree in business administration from Oxford Brookes University in the United Kingdom. He speaks, English, Polish, Russian and German. He is married with two children, enjoys running and listening to live music in his spare time. Since he travels a lot for his job, he prefers to spend weekends in Kyiv with friends and family.
From the architecture to culture, food and friendliness of people, “I like Kyiv a lot. It was a very positive surprise.”
