Privatization: A Crucial Test In Vladimir

This Thursday marks a significant day in the history of Russia's reforms. June 30 is the final day of voucher privatization or, as it is called, "privatization Chubais-style."As voucher privatization comes to an end, it is interesting to take an inside look at the changes that this process brought to one of the monsters of socialist industry, the Vladimir Tractor Factory.The factory was one of the first giant Russian machine plants to commit itself to privatization. The state stock company Avtotraktoreksport attempted to get control of the factory, since its tractors are practically the only competitive products in this category in all of Russia. At the same time, a private company called Renova also sought to purchase a majority share.But the most interesting thing about the situation was that Renova planned to replace the factory's director. The firm hoped to place Iosef Bakaleinik, 40, a graduate of Harvard Business School, in that position. Before he entered Harvard, Bakaleinik spent seven years as the factory's assistant director of economics. In other words, with Renova's help, Bakaleinik hoped to take over from his former boss, Anatoly Grishin, who been the director of the factory for 18 years.Everyone knows that the director of a major Soviet factory is not merely a director. He does not just give his workers their jobs and their salaries: He gives them apartments, day care, inexpensive goods from the factory's subsidiaries. This is exactly the function that Grishin fulfilled. And he was supported by Avtotraktoreksport, which was in danger of losing its most lucrative export product.At the first shareholders' meeting, the majority sided with Grishin as the embodiment of "factory socialism" and the old stability. Bakaleinik told shareholders that the old Soviet management methods that Grishin used would lead the factory into a dead end, and shareholders would soon be calling for this "Harvard upstart."Indeed, that is what happened. Toward the end of 1993, the factory came to a standstill, and workers went two or three months without pay.At the end of January, Grishin asked the board of directors to remove him from his post. At the end of March, during a regular shareholders' meeting, Bakaleinik was made general director. This time, he was supported even by Avtotraktoreksport, as well as by thousands of small shareholders who now had confidence in his program for developing the factory.In the old days, of course, Grishin simply would have been given some additional subsidies from the state budget and the young "upstart" would never have dared even dream of taking over as director of this major plant.Even though it is perched on the edge of bankruptcy, the factory has excellent potential. Nearly 20 percent of its output is sought after on the world market, in such countries as the United States and Canada. Now the factory also has an excellently educated director. If Bakaleinik manages to get this monster of Soviet industry on its feet, that will mean that other new owners and managers will also have a good chance at success. But if a person such as Bakaleinik is unable to succeed, it is unlikely that anyone else will be able to. All the objective and subjective circumstances seem to be in his favor. In other words, if he fails, it will mean that Russia's privatization plan has some fundamental, hidden defects.