Russia's Uralvagonzavod (UVZ), the railcar manufacturing subsidiary of state-run Russian Railways, announced it is threatening legal action against SKF AB (Sweden) for failing to supply enough complete axlebox bearings to meet a contracted delivery schedule for its rolling stock.

UVZ said final production and delivery of an order for more than 1,500 gondola cars was on hold because complete bearings have not been available. SKF did send a shipment of more then 2,000 bearings, and UVZ has offered several different, conflicting reasons for their unhappiness: the bearings were rejected, for unspecified reasons; or, they weren't rejected but represented too few bearings shipped against a much larger order; or, they weren't rejected but were delivered too late to meet production deadlines; or, UVZ had accelerated its orders and SKF couldn't deliver against the new schedule.

An SKF representative told eBearing that no bearings were rejected by UVZ, it had been delivering against a speeded-up schedule, and that UVZ in fact had pushed back some deliveries starting in August due to the softer market. And that UVZ never failed a complaint.

Railcars are manufactured in three main components: the structure itself, and two trucks, which carry the wheel, suspension, and brake assemblies. Rolling the trucks under a finished railcar is generally one of the very final assembly steps before delivery.

SKF has made major commitments to the Russian rail market, and to its key customer, UVZ. SKF plans to begin manufacturing its TBU rail bearings in Russia from a greenfield facility in Tver sometime in 2010. To date, SKF's investment at Tver totals approximately $40 million and is expected to ultimately reach $117 million.

Until Tver is online and delivering, however, rail bearings are being supplied by the company's other factories. While government sources indicated UVZ's bearings are produced by SKF in Nankou, China, an SKF representative told eBearing that is incorrect -- all of UVZ's rail bearings are being manufactured in Italy.

Widespread and systemic upgrades to Russia's rail system includes upgrading the railcars themselves. To that end, new specifications require that they carry nearly twice the load of the previous generation. With that doubled axle load, new roller bearing specifications and quality requirements were also put in place.

An unexpected result, however, was that no Russian rail bearing manufacturer has been able to meet these new standards, paving the way for SKF to win the business. But not without some fallout from within Russia's politically well-connected manufacturing sector.

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Still, the key supplier of standard rail bearings in Russia continues to be European Bearing Corporation (EBC; 5251R9N7), receiving a 5-year contract in 2005 covering 80% of Russia's new rolling stock.

When that contract expires, SKF is widely expected to step in and fill the gap. And because Russia's corporate and manufacturing climate is so highly politicized, many analysts believe the timing of UVZ's complaint is simply feigned posturing against SKF.