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. Last Updated: 07/27/2016

Kharkiv Plant to Design Tractors for Real World

KHARKIV, Ukraine -- Once the mere sight of one made proud Soviet hearts beat faster, but the humble tractor is almost an endangered species in the tough world of Ukrainian farming these days.

True, 68 years after its very first tractor rolled off the conveyor belt, the ocher Stalinist building of the Kharkiv Tractor Plant, or KhTZ, still stands as it has since its founding in 1931 to help fuel an empire's leap into the 20th century.

"Boy meets girl meets tractor" applied to a whole genre of Soviet films that spiced up scenes of industrial prowess with tales of proletarian love.

Ukraine's largest tractor plant, KhTZ yields first place in size and seniority among its former Soviet peers only to Russia's Volgograd plant.

And it still survives by doing only what it was originally set up to do, unlike many other factories around the former Soviet Union, which have bowed to the market zeitgeist and diversified into simpler consumer goods.

But times have certainly changed.

Now, squeezed between subsidy cuts, snail-paced land reforms and state controls, impoverished farms that once might have thought nothing of buying a new tractor make do with aging equipment and lack fuel to run the vehicles they do own.

On the eve of the 21st century, the firm's main task is production of the kinds of tractors clients actually need and can afford rather than Stakhanovite production figures, says KhTZ's marketing director Dmytro Serhiyenko.

Annual output has shrunk from 56,000 tractors in 1986 to 2,500, but the range of machines the plant produces has widened significantly since the era when Soviet planners dictated which factories should produce which kind of machines.

KhTZ now produces 12 to 240 horsepower vehicles suitable for everything from puttering round the vegetable plot at the summer cottage to huge models with all-terrain tank-style wheels.

It estimates the potential domestic market for its products at around 16,000 tractors a year.

"But we take a sober approach to the situation: firstly, since our main customers are Ukrainian and Commonwealth of Independent States farms which have a very low ability to pay, our task is to see [that] the tractor is ... reliable and is price competitive," Serhiyenko said.

Recent legislation facilitating leasing arrangements for the first time has eased some of the firm's financial headaches.

But barter remains the main form of payment.

Competition from former Soviet brethren is also tough, from Belarus, where Germany's MAN Nutzfahrzeuge AG started full production at a Minsk automobile plant this year, to Russia's Lipetsk and Volgograd plants and Moldova's Chisinau plant.

KhTZ, which despite attempts to find a strategic investor remains 53 percent state-owned, has had some success attracting foreign investment, including a $35 million loan from the German government for engines made by Germany's Deutz AG.

Trying to rebuild exports shattered by post-Soviet economic turmoil is a key goal. KhTZ once supplied Russia with 25,000 tractors a year and Serhiyenko said the plant still sees the eastern neighbor as its main potential market.

Striving for improvement was a continuing effort, he added.

"Our main task is to continue putting out our basic tractor, second to work on improving its technical level and reliability, and third and most important find our place in the market and raise our output to at least 10,000 to 15,000 vehicles a year," Serhiyenko said.

"Then we can talk about improving profits and costs - and then those strategic investors will probably come more willingly, too."