Newspaper article The Christian Science Monitor

Busmaker Strains to Enter Western Economic System FROM MARX TO MARKETS

Newspaper article The Christian Science Monitor

Busmaker Strains to Enter Western Economic System FROM MARX TO MARKETS

Article excerpt

MOST Americans have never heard of Ikarus, but for most of the world it is more famous than Mercedes or Volvo. In fact, the Hungarian company is the biggest bus manufacturer anywhere. For years, Ikarus has dominated the huge Soviet and East European markets. Its main plant here on the outskirts of Budapest produces up to 15,000 buses a year.

But earlier this year, Ikarus declared bankruptcy.

The company's fortunes plummeted after trade between Moscow and its former satellites switched to hard currency on Jan. 1. Instead of accepting worthless rubles, the East Europeans now demanded strong dollars. Moscow couldn't pay. The result: More than 800 buses built for the Soviet market are held up.

"The Soviets want to pay," says Jeno Madi, Ikarus's vice president. "They simply don't have the means."

Since then Ikarus has begun to find new markets and has emerged from bankruptcy, though its finances remain fragile. It isn't alone. For years, the region's industrial dinosaurs banged out obsolete products for undemanding Soviet customers. This year, trade between Eastern Europe and the Soviet Union is down by more than 50 percent. It could fall even more unless the slide of the Soviet economy is stopped.

East Europe's youthful democracies are worried. Mass bankruptcies could mean mass unemployment and the danger of social unrest. Imagine Pittsburgh losing its steel industry, Detroit its car industry, even Silicon Valley its computers - all in a matter of months, even days.

"A lot of our factories were not built for profit, but for the Eastern market and for military purposes. Market logic says they should go bankrupt," admits Janusz Lewandowski, the Polish privatization minister. "But this of course is a social and political problem: We cannot let ... factories which are employing thousands of people" go bankrupt at a quick rate, he says.

Dangerous as the situation is, many state-owned operations are fighting back, showing more resilience than expected. They're shedding workers, cutting costs, and finding new markets in the West.

"Many of our big state-run companies are almost bankrupt, partly because they are too large, and partly because of the collapse of the Eastern market. But with restructuring I think the problem is manageable," says Mihaly Kupa, Hungary's finance minister.

"We are looking towards the Western markets, while keeping as much as of the Russian market as possible," Mr. Kupa adds.

The hope is that Hungarian companies, benefiting from low labor costs, can carve out a significant competitive advantage over their Western competitors. It's not an unrealistic proposition. Ikarus buses may not match Mercedes or Volvo in design or comfort, but they're sturdy, reliable - and as much as 70 percent cheaper.

Thanks to this price advantage, Ikarus has won important contracts in recent months with Kuwait, Iran, Turkey, and Taiwan. …

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