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. Last Updated: 07/27/2016

Zil's Private Gamble

It is not hard to understand why Vasily Puityrziu pines for the days when the ZiL autoworks was run by the state. For 20 years, Puityrzyu had a privileged place in an enterprise at the center of Soviet power. The sleek, black ZiL limousines that were custom-made for the country's top leaders, at the painstakingly careful pace of only two or three per year, symbolized the pinnacle of the Soviet elite. The 145, 000 trucks that rolled off ZiL's assembly lines each year were evidence of Soviet industrial strength.


But Puityrzyu decided to support privatization - and not simply because he realized he had no other choice. He saw that the ZiL management was doing everything it could to keep things the way they used to be. When ZiL became the biggest Russian enterprise to hit the auction block this year, workers and managers were guaranteed a controlling stake in the company. Only 35 percent of the shares were put on the open market.


"The union used to be frightened by all that rubbish about capitalist bosses oppressing the workers", said Puityrzyu, a full-time representative for the company trade union. "But we the workers have become capitalists. The main packet of shares is in our hands".


Even the management of ZiL has stayed the same. Yevgeny Brakov, the director of the company, now called the Moscow Joint Stock Company ZiL (AMO ZiL), is a longstanding ZiL production director who had the backing of the Communist Party when he unsuccessfully challenged Boris Yeltsin in parliamentary elections in 1990.


"It's not so much that he opposed privatization", explained ZiL spokesman Venyamm Kalner. "He just didn't understand his place in it".


Since ZiL opted for privatization in September, Brakov has not made the harsh cutbacks most economists say are needed to compete as a private company. He has continued a policy of subsidizing the company hospital, the company holiday resort in Georgia, and the company sports and cultural centers.


"We do not want to give any cause for conflict", he told a recent news conference.


The conservative management of the company may appease ZiL's 108, 000 workers, who have been at the center of the privatization debate. While the company newsletter, the Moscow Auto-Worker, has published pro-privatization articles, anti-reform groups have plastered posters at the factory's main entrance depicting fat capitalists sitting on the shoulders of suffering ZiL workers. The captions read:


"Throw out Boris and his bully boys before they take us to disaster, hunger, cold and civil war".


Management's desire to avoid conflict is understandable, but it may also prevent the company from being successful in an economy where its primary customers - Russian government departments and state-owned firms - have little money to spend. Creating their version of privatization with a human face, the company's directors may bring ZiL to the most difficult stage in its illustrious existence.


Within the ZiL Museum, located on Auto Factory Street near a bend in the Moscow River, a television plays a seemingly endless videotape of ZiL's latest trucks. It is one of the few things in the museum that is contemporary. Open by request only, the museum is a monument to ZiL's socialist past.


Founded in 1916, ZiL was nationalized on June 28, 1918; on that day, Lenin attended a massive demonstration of workers at the factory.


ZiL soon became known as the "flagman of socialism", one of the first great examples of the industrialization that state ownership would bring to Russia. It was to be a model to the world of the superiority of a rationally planned state-run economy and a worker's state. Under Stalin, the factory was called ZiS, an acronym for The Stalin Factory.


Under Khrushchev, the factory was renamed ZiL in honor of I. A. Likhachev, who was the factory's director for 25 years, including during World War II.


The ZiL museum does not chronicle the latest developments in the conglomerate's history.


After the Russian parliament passed the fundamental law on privatization last June, meetings were held in ZiL's 15 factories. One factory in Penza which only joined the ZiL group a year before said it did not want to be associated with ZiL.


In August, a conference of 700 delegates met, representing the worker's collective from the other 14 factories. Only eight delegates voted against privatization.


The government's slice of shares in ZiL went up for auction to private investors on March 15. When the auction is finished in late April, workers will get another big slice, either for free or at preferential rates. ZiL will be the biggest of Russia's industrial firms to be privatized.


Puityrzyu, the union representative, said the union's relations with management are good. But it remains to be seen how long the comfortable relations continue.


Management says that ZiL has raised wages in step with inflation and workers receive an average of 26, 000 rubles per month, well above the nationwide average of 18, 700 a month. But workers grumbled recently to a reporter that the average wage on the production line was only 12, 000 rubles a month.


Management also says it has not had to sack any of its workers. In fact, ZiL is short of workers and cannot find anyone to fill its available positions.


But a production director said that although no workers had been made redundant, the factory had decided to sack 243 of 300 Vietnamese guest workers for breaches of work discipline and theft. ZiL has scores of workers from other republics in the CIS which it could also shed before it starts to cut its Russian work force.


That does not mean that the workers aren't worried. Valentina Mikhailova, who has worked at ZiL for 20 years, is too confused to know what to think about privatization.


"It's happening, that's for sure, but I have no idea whether it's good or bad", said Mikhailova, 53.


Despite these grumblings and disputes, industrial peace still reigns at ZiL. Puityrzyu says the ZiL trade union does not want to get involved in strikes because of the money workers would lose. As a precaution, however, the union recently decided to lift contributions to its strike fund which now only has the resources to support workers for two days.


Ultimately, as with any private company, the fate of ZiL's workers will depend on whether ZiL can make profits.


Brakov, initially an opponent of market reform, is now enthusiastically trying to make the transition to private property. He and another 150 of ZiL's top managers will soon have a very direct stake in the factory's profits. They have bought 5 percent of shares in ZiL, investing an average of 1 million rubles ($1300) each.


According to one western truck company executive looking to invest in the Russian trucking industry, ZiL's biggest problem is that its trucks, which account for 90 percent of its profits, are still not at world standard. ZiL has set about redesigning its range, producing smaller lighter trucks with more modern cabin designs.


Another problem is that most of ZiL's current customers are either Russian government departments or Russian state-owned firms, neither of which have huge amounts of money to spend. Finding new markets, especially export markets, and a new sales network are other formidable challenges facing the company.


The difficulties of relying on government orders has even affected sales of the black limousines the ZiL factory used to make for members of the Communist Party politburo. Stuck with several limousines that the government ordered but never paid for, ZiL now rents the luxurious cars to Russian **biznismeny** and foreigners for $30 an hour.


Russian investment analysts also doubt whether the management of ZiL has the will to take on its workers, cut costs and restructure.


Andrei Kosogov, director ofAlfa-Kapital, one of Russia's new voucher investment funds, says his fund will not invest in ZiL because of the political complications. "We want to make changes and that's hard with such a big company and with so many interests involved", he said.


ZiL is now talking to French, German and Japanese companies about buying a special 10 percent stake in the company, probably for hard currency. Foreign investors will want proof that the company will produce a return.


Clearly, life at ZiL was simpler under the regime of state orders. But it seems that the company's workers, its trade union and its managers have accepted the need for a change, if only because the old way is so clearly dead.


A token of the abrupt change of attitude can be seen in a factory billboard set up in front of an old Soviet monument to ZiL's contribution to the creation of world socialism. The new billboard exhorts ZiL employees, "Remember you are now working in the market. Make sure you are producing goods that consumers will want to buy".