Furniture Boss Gets By, With Just a Little Help

When Valentin Zveriev took over the Shatura furniture company in 1982, Leonid Brezhnev was on his last legs, pop group ABBA was all the rage and sausage went for two rubles and 90 kopeks.


But don't assume this 49-year-old boss is stuck in the past. Since the furniture giant's privatization in 1993, he has reorganized the firm from top to bottom and lured foreign partners -- with help from two European Union TACIS programs -- that might have pushed the former "red director's" firm into the green.


"When we were privatized in 1993, I realized that no one would tell me what to do any more," said Zveriev, Shatura's general director. "I knew we had to raise competitiveness and concentrate on what we did best, but I needed advice on how to do it."


Zveriev was on display in Moscow last week as TACIS officials kicked off the first in a series of seminars aimed at showing their success at revamping parts of Russia's wood processing industry. Other seminars will be held in St. Petersburg, Vladivostok and Yekaterinburg.


Since 1994, TACIS -- Technical Assistance to the Commonwealth of Independent States -- has committed 2 million ecu ($1.7 million) to six Russian companies in the furniture and wood processing sector. From 1991 to 1996, the European aid agency committed a total of 2.4 billion ecu to CIS nations.


In 1993, Zveriev said, Shatura was a sprawling enterprise in a town of the same name 130 kilometers east of Moscow with 4,200 employees making basic wood furniture and components.


One in seven of its employees had nothing to do with production. They ran the company's social infrastructure -- including three primary schools, seven blocks of flats, a sports complex, a sanatorium and a farm.


Zveriev acquired more than 20 percent of Shatura's shares in the 1993 privatization, which gave him plenty of incentive to make the company work.


Last year, the company reported a turnover of 250 billion rubles. Although the figure declined from the previous year, Zveriev said the lost revenue was offset by lower costs.


Through a TACIS privatization program later in 1993, he won the services of U.S. management consultants McKinsey & Co. to introduce Western accounting and streamline production at Shatura.


Although TACIS generally does not allow a company to participate in different programs, Zveriev persuaded it to bend its rules in 1994 and allow Shatura into another of its programs -- this one seeking to reorganize wood processing enterprises. "McKinsey consulting had done a lot for us, but we still needed help with marketing and sales, and finding foreign partners," Zveriev said.


Under the second program, Zveriev said, Shatura worked with the Italian Wood-Processing Association and management consultants CAST to retool its production and marketing. It has since begun making furniture good enough to compete with foreign imports for the "New Russian" market.


"We now have signs written up all along our production lines," Zveriev said. "They say 'Don't accept defective work, don't do it, and don't pass it on.'"


Shatura's involvement in the second TACIS program enabled it in to link up with the Italian firm San Giorgio in a $2 million joint venture to make kitchen furniture for the Russian market.


A second Italian joint venture valued at $6 million pairs the company with San Giacomo to produce stripped birch and plywood for European markets.


Both joint ventures are expected to begin production in the second half of 1997, although Zveriev said he would eventually like to spin off the plywood business and maintain furniture-making as his company's core activity.