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Where there is no law, but every man does what is right in his own eyes, there is the least of real liberty
Henry M. Robert
23 February, 1999 - 00:00

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Life Under the Varangians

Swedish road of the Lutsk ball-bearing plant

By Oleh POTURAI, The Day
The Lutsk Ball-Bearing Plant (LPZ) is to lay off almost 1900 employees
by the end of 1999.

As recently as eight years ago, this plant, one of the largest in Volyn,
produced 8.6 million tapered bearings and over 13 million universal-joint
bearings. The profits were enviable.

Sweden's SKF bearing company knew what it was purchasing. The State
Property Fund rescheduled the privatization plan. The plant was originally
intended for a certificate auction but then sidetracked for a non-commercial
competition. The latter was won by SKF which netted 28% of the state's
block of shares. But this did not satisfy the Vikings' heirs. Well before
the competition had ended, they began to buy out the enterprise's shares
through a commercial intermediary. Over a three week period they acquired
48% of the stock, out of which Hr 8.5 million were paid to current and
former workers who were happy to relinquish their share of state property.
Factory management had an 11% stake, but they also voluntarily gave it
up.

A year has passed under SKF, or should we say, under the Varangians
(as Vikings were known in our history - Ed.)? They, incidentally,
have met their investment obligations for the period in question. LPZ first
deputy general manager for finance and projects Max Robertsen assessed
the situation like this: "Last year we planned to invest $6.5 million.
We intended to use the greater part of this money on equipment and technology
development. But it turned out otherwise. Almost all the funds were used
for paying taxes and wages. This cannot continue so. We expected better
results."

Indeed, last year for every hryvnia paid as wages 1.25 hryvnias went
for taxes. Moreover, the mammoth plant is moaning under its own weight.
Its area is seventy hectares. It was not completed in Soviet period, but
still it has an infrastructure designed for a fully installed capacity.
It takes tremendous money to maintain this. In addition, the enterprise
is oriented toward consumers from Russia, Belarus, and Ukraine. The latter
buys a tiny number of bearings, while the former two are able to settle
accounts only by barter. After the August 1998 crisis these settlements
are often made via arbitration courts. Thus, there are no adequate sales.
Nor has the relationship with local authorities been settled: LPZ provides
heating from its own sources to a Lutsk neighborhood, but the city fails
to refund the money. The debt has reached Hr 2 million.

Deputy general manager for social matters Yuri Syvenko described another
problem, by far the most important. Our workers are not used to handling
items with care; they usually throw them down. But even two microscopic
defects on a set of rollers is enough for the whole item to be rejected,
for this item will make two much noise in operation. In addition, the Swedes
resent workers working four hours a shift at best, and smoking or hanging
around the rest of the time. The result is that Germany's LЯchow ball bearing
plant, employing 1,000 workers, produces 120,000 bearings a day. LPZ, employing
2,900, turns out 360,000 bearings a month.

Thus, SKF says it cannot tolerate this any further. This year the company
will only utilize its investments for production development and plant
restructuring, rather than throwing them down the drain. Production will
be confined to certain areas, while others will be mothballed or decommissioned.
A new model for the enterprise is in the works. The reason for it is a
narrow sales market, rather than a desire to economize on Ukrainians.

Simultaneously, those who stay behind at LPZ will have to work according
to world standards. Not only the Varangians demand this; so do the current
realities which we, still used to Soviet ways, find it so hard to get used
to.

 

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