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. Last Updated: 07/27/2016

Saratov Conversion Folly Falls to Japanese

SARATOV, Central Russia -- At the time, it seemed like a great idea.

The massive Tantal defense electronics factory would convert some of its weapons-related production to video recorders, something that many Russians wanted but few had.

The only thing that Tantal's managers did not count on when they started designing video recorders in 1986 was competition from the outside world. Last month, after several years in a lopsided battle with Asian imports, Tantal ended its unsuccessful experiment.

Their efforts to make a microwave oven are also suffering a slow death, company officials say.

"You can't compete with the Japanese," said Georgy Umnov, the factory chairman. "How could I compete with the massive conveyer belt at Mitsubishi?"

The episode is a telling example of the difficulties former defense plants are having as they try to convert their production into consumer products for the free market.

"The main lesson is that we must choose products that people will buy, not only in Russia, but abroad as well," said Alexei Kaplin, executive director of Tantal's board. "We just were not ready to face the market."

Figuring out what the market wants is exactly what several gargantuan factories that formerly specialized in defense electronics are now grappling with in Saratov, 650 kilometers southeast of Moscow. For some, the approach has been to design dozens of consumer products and hope that at least a few have some public appeal.

The Saratov Electronics Aggregate Enterprise (SEPO) for one is promoting its latest inventions with trilingual Russian, English and German color brochures. Among the jewels contained within: a gallery video game sure to win the nostalgia market with its 1970s graphics; a fisherman's aid which raises a flag when a catch is at hand, and an "Automatic Control Pass Station," a bulky turnstile system for factory entrances which slams down a barrier on unwanted intruders.

According to Prime Minister Viktor Chernomyrdin, however, these sidelines have distracted SEPO from its most successful consumer line -- refrigerators and freezers.

Production "ground to a halt last May, even though they have been producing a normal refrigerator, the Saratov," Chernomyrdin said two weeks ago in the Kremlin. "It is not easy to do this."

Factory officials said they temporarily stopped production because of a shortage of parts and money, but observers say the factory, like so many across Russia, is experiencing problems because they are loaded down with unneeded workers.

"If all directors adopted the position of many bureaucrats and fired workers, things would be much easier, but our social conscience won't allow it," said Yury Sichyov, head of the regional association of industrialists and himself a defense factory manager.

That means that SEPO, once a major producer of electronic starters for jet fighters, still employs 20,000 workers, down just slightly from a few years ago. Many of Saratov's other massive factories also keep on a huge workforce despite a nearly 40 percent drop in production for the first six months of 1994 compared with a year before.

Many defense industry factory executives say they have been waiting for a magic injection of foreign investment, and they are not shy about showing resentment that outside help has not been more forthcoming.

"All of these American creeps -- and the Germans too -- they all talk and they don't invest any money," said Umnov, a 35-year-veteran of the Tantal factory.

Such bumps on the road to the market economy have made many strongly resistent to reform in this formerly closed city of 900,000 on the Volga River. Ultranationalist Vladimir Zhirinovsky and similarly minded former vice president Alexander Rutskoi have both visited the city lately to warm receptions.

"Those in the defense industry were among the highest paid people in the past," said Yevgeny Sablin, a spokesman for the oblast administration. "Now they are the least lucky because they are not trained to do the new work."

The difficulties of conversion have convinced some industrialists to look to the past for solutions. "We should study the situation in Ukraine and Belarus and repeat it in Russia," said Sichyov, whose group unifies 64 local industrial enterprises.

For factory managers, such talk means continued credits and generous government treatment. For the country as a whole, such a policy would most likely unleash -- as in Ukraine and Belarus -- disastrous inflation and conditions of economic depression, most economists agree.

Nevertheless, factories such as Tantal are going back to the drawing board to come up with a new batch of ideas to face the market on their own. Tantal has split up the company into 75 smaller subunits to design a new generation of goods including toasters, TV remote controls, auto parts and polygraph machines.

As far as video recorders are concerned however, the motto is, "Never again."