Privatization on a Roll as Russians Buy Into Car Firm

One of Boris N. Yeltsin’s first lessons as president was that Russians notice what kind of car their leaders speed past them in. Criticized for importing a Mercedes-Benz, Yeltsin reverted to the homemade brand of his Communist predecessors, the stolid black ZIL limousine.

“Buy Russian” sentiment is far from universal in a country that, after seven decades of Communist isolation, is embracing Barbie dolls and devouring McDonald’s hamburgers. But it is enough to sustain a fledgling market for shares in hundreds of state-owned companies now going private in a selloff unmatched anywhere in scale.

The privatization program, centerpiece of Yeltsin’s free-market reforms, gained momentum this week when ZIL, the maker of hand-crafted limos for the Kremlin elite, went on sale to the masses. In cities across the country, thousands of novice capitalists turned out to buy stock in the largest Russian company so far put up for sale.

Even as Yeltsin’s conservative parliamentary foes chip away at his powers in a bitter assault on the reforms, privatization is racing ahead like the limos that whisk the feuding politicians around Moscow.

Dmitri Vasilyev, deputy chairman of the State Property Fund, said 20 major companies were privatized in December, 90 in January and 190 in February--from the GUM department store on Red Square to the Volgograd Tractor Factory.

Three hundred more companies are on the block this month, he said, and all small and medium-sized state firms are to be sold by the end of the year. The pace is quicker than the post-Communist selloffs in Eastern Europe.

“Now that this process has been started, there can be no return to the past,” economist Antoninina Lapitskaya, 50, said as she plunked down two “privatization vouchers,” each worth 10,000 rubles, or about $18, for ZIL stock. “If it is not Yeltsin, any other leader will have to continue this, even if he is a Communist.”

That is exactly what Yeltsin’s strategists hope: that enough Russians will acquire a stake in the reforms to make them irreversible. Last fall, the government offered a free voucher for each Russian citizen to exchange for any stock, and officials say 98% of the people showed up to claim them.

So far the effort is overshadowed by the runaway inflation, capital flight and corruption that have shrunk Russia’s economy and discouraged foreign aid and investment. Still, the government expects the selloff eventually to relieve it of demands by Soviet-era factory managers for expensive bailouts.

Under pressure from these managers, the Supreme Soviet (legislature) is studying a bill to give them and their workers first option to buy virtually all shares of their companies, a move that critics say would sharply limit new initiative and investment.

And during last week’s dramatic power struggle at the Congress of People’s Deputies, Speaker Ruslan I. Khasbulatov demanded the dismissal of Deputy Prime Minister Anatoly B. Chubais, the director of privatization.

As Yeltsin weighed the option to call a plebiscite to try to enhance his powers, most Russians interviewed at Moscow’s Inter-Regional Auction House expressed support for the president.

“They are voting with their vouchers,” said Julia Zagachin, an American adviser to the auction house. “I pity the politician who would try to take the vouchers away. I don’t know if there would be riots. But it would be political suicide.”

Still, the government has been forced to compromise to get factory managers to take part in the selloff.

At ZIL, for example, 40% of the shares are being distributed among managers and employees. The state will hold 15% and another 10% is reserved for foreign investors. The remaining 35%, more than 1 million shares, are being sold for vouchers until April 20.

Founded in 1916, the company became an exemplary Communist enterprise, better known in Russia for its huge refrigerators and clunky trucks than for its limos. Its name is the Russian acronym for Likhachev Auto Works.

Also notorious as Moscow’s worst air polluter, ZIL claimed a $17-million profit last year while laying off some of its 108,000 workers to preserve such social benefits as vacation retreats and child-care centers for the rest.

As with other Soviet behemoths, ZIL’s image as an industrial giant impresses many Russians seeking a good investment. But such faith in homemade products may not be justified in the long run. If Russia stops subsidizing energy prices, industry specialists believe ZIL’s goods would be vulnerable to competition from foreign imports.

The company’s director, Yevgeni A. Brakov, a veteran fulfiller of five-year plans, talks like a man in tune with the new times, seeking Western partners and product lines. With new stockholders coming in, he’s also trying to save his job.

“Now we are working for consumers, and we will make things consumers want to buy,” he said Thursday. “It gives us anxiety and pleasure at the same time.”

But ZIL’s truck assembly plant, where musical robots and manned forklifts dart around slippery concrete floors, is a picture of Soviet-era improvisation. Thursday, workers wielded hammers and steel pipes to bash one stubborn truck cabin into place on its chassis. Some of the new vehicles are bartered for wholesale sugar to maintain the workers’ lunches.

The stretch limousines, starting at $230,000 apiece, are a classier act, offering bulletproof safety and secure telephones. Brakov said ZIL made 25 last year, all for sale in Russia to the officials wrestling over the country’s future.

“It is very difficult to predict who will end up on top,” said Lapitskaya, the economist who was buying ZIL stock. “But it makes no difference who they are, Communists or not. Those in power will all drive around in ZIL limousines. They can easily afford it.”