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. Last Updated: 07/27/2016

Former Soviet Truck Makers Face a Rough Road

WARSAW -- Bus and truck manufacturers in former Soviet bloc countries lack the competitiveness to survive the globalization of their industry, automakers and analysts said at a conference in Warsaw this week.


"KamAZ is the best of an appalling lot, and I wouldn't bet 10 cents on its future," said Richard Connell, an auto analyst at management consultancy AT Kearney Ltd., referring to the state-owned truck maker in the Tatarstan region of Russia.


Particularly troubled companies include MAZ of Belarus, ROMAN SA of Romania and UAZ and AMO ZiL of Russia. Their output is only a fraction of the levels in the pre-1990 communist era.


Commercial vehicle manufacturers have dug their own graves, albeit involuntarily. Under command economies, they often built massive factories to meet arbitrarily high state-sanctioned production orders. Over-employment burdened the companies with inefficiency.


"They existed in an artificial industry," Connell said. "They have the wrong mix of products, and they're simply unable to satisfy the needs of the global markets."


The companies have tried to revive themselves, and many have contracted international advisers to restructure their operations. But most efforts have failed, fundamentally because the companies have been slow to modernize their vehicles to compete in mature markets.


"The companies in Central and Eastern Europe have been catapulted rapidly from a sheltered system into a global environment exerting a lot of competitive pressure," said Steve Young, an AT Kearney vice president. "In the long term, I doubt they'll survive, but I also could say that about a lot of components manufacturers from Western Europe."


While several international automakers have spent $1 billion or more to buy state-owned carmakers in former communist countries, international bus and truck makers have shunned such deals.


The most significant privatization of a commercial vehicle manufacturer in the old East bloc involved Renault SA buying a minority stake in Czech bus maker Karosa AS.


The Hungarian government's recent effort to privatize bus maker Ikarus Jarmugyarto Rt. attracted no bids from commercial vehicle makers, and the company's chairman has said Ikarus could not survive beyond March without foreign capital.


Foreign interest in the region's bus and truck makers is unlikely to increase. Asian and U.S. manufacturers build vehicles to different legal and technical standards, and Western European companies already suffer from overcapacity.


Some companies, such as AB Scania and AB Volvo, have opened small-scale assembly plants in the region, partly to avoid high import duties on completely-built trucks.


But all commercial vehicle manufacturers have struggled to develop their presence in the region where the infrastructure is poor. Customs authorities often delay border crossings of road haulers, constraining the transport industry that buys the trucks, automakers and analysts said.