View Full Version : You know the economy hit the skids when

Kraven Morehead
22-09-2009, 21:30
Kalashnikov faces bankruptcy

Paul Waldie

Globe and Mail Update Last updated on Tuesday, Sep. 22, 2009 03:02AM EDT

For years, the AK-47 assault rifle has been the world's most popular weapon, the gun of choice for dictators, gang members and Third World revolutionaries.

But the global recession and a proliferation of copycats has left the Russian maker of the Kalashnikov, OAO Izhmash, in financial turmoil.

Monday, a court in Russia said it will consider a bankruptcy application filed against Izhmash by a supplier owed more than $13-million (U.S.). According to reports out of Russia, Izhmash has been losing money for years on its small-arms business and closed its largest gun factory in Izhevsk for much of 2009.

The company, which makes other military weapons and hunting guns, has blamed its problems on falling orders from the cash-strapped Russian army and a flood of AK-47 look-alikes from factories in China, Bulgaria, Poland and elsewhere.

By some estimates, copycat versions of the gun outsell Izhmash's legitimate variety 10 to one.

“They have been having this trouble for at least five years,” said Larry Kahaner, a Virginia-based journalist.

“We are at the point now that because it's so easy to make, anybody can make it,” said Mr. Kahaner, who wrote a history of the gun called The AK-47: The Weapon That Changed the Face of War .

Izhmash's troubles stand in contrast to some U.S. gun makers, such as Sturm Ruger & Co. Inc. and Smith & Wesson Holding Corp., whose sales and profits jumped sharply this year. That's largely due to specialty products and political issues in the United States where people have been buying guns out of concern President Barack Obama will tighten gun control during his tenure.

But international sales by both U.S. companies have not been as strong and military suppliers around the world have been coping with shrinking government spending on the military because of the recession. Izhmash is facing similar economic pressures along with an oversupply of discount look-a-likes.

Even the gun's inventor, Mikhail Kalashnikov who lives in Izhevsk, has complained about the counterfeits. “They just use the brand, the fame. It's not fair,” Mr. Kalashnikov told reporters in 2007.

Mr. Kalashnikov, a former Russian soldier, designed the gun while recovering from injuries during the Second World War. His work culminated in the AK-47 – taking its name from “automatic,” “Kalashnikov” and 1947, the year it was introduced.

Although less accurate than other machine guns, the AK-47 is easier to use and more durable. “It's simple, it's cheap, it's indestructible,” Mr. Kahaner said. “You can fix it with a coat hanger and a piece of gum. You can bury it for 10 years in the sand, pick it up out of the ground and it still works.”

The gun “was designed to be used by people with a minimum amount of training,” added John Hipwell of Wolverine Supplies, a gun dealer in Virden, Man. “And it was designed to be made with a minimum amount of expensive machinery.”

The Soviet Union not only adopted the AK-47 for its military but granted production licences to dozens of friendly states. However, Mr. Kalashnikov's design was never patented and the production agreements were largely handshake deals.

When the Soviet Union collapsed in 1991, those client states began pumping out volumes of AK-47 variations, often charging much less than Izhmash. Today there are an estimated 70 million AK-47-type guns in circulation around the world, and in some countries the weapon can be bought for as little as $50.

Izhmash has tried to fight back with newer versions of the gun, such as the AK-100 series, which features a lighter design and more accuracy. And it recently signed production contracts with India and Venezuela. But Mr. Kahaner doubted those moves will be enough.

“There's no profit margin in small arms, that's the bottom line,” he said.

When you can sell guns to crazies, then you know there is a problem