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JAMES FLANIGAN

Soviets Failing a Lesson Taught by Henry Ford

December 07, 1988|JAMES FLANIGAN

As Mikhail S. Gorbachev makes a pitch during his New York visit for more business with the United States, his government is returning to an old Russian standby and once again asking Ford Motor Co. to make cars in the Soviet Union.

The immediate story is that the Soviet automotive ministry is talking to Ford about modernizing a 60-year-old car plant in the city of Gorky to manufacture Ford Scorpio models in the Soviet Union.

The talks, which could lead to a deal by next spring, are part of Gorbachev's stepped up efforts to modernize the Soviet economy through ventures with international companies. Talks are also being held with Eastman Kodak, Johnson & Johnson, Chevron and other U.S. companies, as well as with Japanese and European firms.

But Gorbachev, for all the excitement of his visit this week, is but the latest in a long line of Soviet leaders who have asked Western industry to make things for the U.S.S.R. Yet none of those past efforts have led to much progress for Soviet industry, which remains backward on the ground though the country vaults into space. The contacts with Ford say a lot about why that's the case.

Lenin himself, the founder of the U.S.S.R., was the first Soviet leader who wanted to do business with Ford. At Lenin's direction, Armand Hammer--the chairman of Occidental Petroleum who was among the first Americans to do business with the Soviet Union--brought Ford tractors into the U.S.S.R.

Later, in 1929 under Josef Stalin, the Soviet Union persuaded Ford to cooperate on building and supervising a car plant in Gorky to turn out Model T cars. Ford made $30 million on the deal, and in the 1930s 100,000 cars a year were built in Gorky--at the very plant Gorbachev's government wants Ford to modernize today.

Few Cars Produced

Yet 40 years later, in the 1970s, Leonid Brezhnev was still looking for a motor industry. "We must have an automobile industry," the Soviet leader told Robert S. McNamara, the one-time U.S. defense secretary who had been president of Ford in 1960. Brezhnev's regime got Fiat of Italy to build a factory that turns out 600,000 cars.

Still the seed didn't take hold. The Soviet Union last year produced 1.3 million cars--fewer than Fiat alone makes in Italy, a country with only one-fifth the population of the Soviet Union.

Why haven't the Soviets been able to build an automobile industry? The answer seems to be that Soviet leaders either didn't understand the car, or they feared it.

When Armand Hammer told the original Henry Ford that the new Soviet Union wanted tractors ahead of luxury goods, Ford replied that "automobiles are not a luxury but a means of service required by modern conditions."

It was a thought he later expressed in his 1926 book "Today and Tomorrow."

"We have remade this country with automobiles," wrote Ford. "But we do not have these automobiles because we are prosperous. We are prosperous because we have them."

Ford understood that the car was more social revolution than machine. Suddenly, people no longer "lived and died without ever having been more than 50 miles from home." They moved around; social patterns changed; economies grew.

"When the representatives of Russia came to buy tractors for their state farms," wrote Ford, "we told them: 'No, you first ought to buy automobiles and get your people used to machinery and power and moving about with some freedom. The motor cars will bring roads, and then it will be possible to get the products of your farms to the cities.' "

But the Soviet Union never truly built the car and has never got its agriculture right--nor the idea of freedom for its people either.

The car, as Ford predicted and nations as small as South Korea and as vast as India have found, was an economic engine. Its mass manufacture brought low costs and high wages, which created the buying power for more cars.

Indeed, the car is such a boon to development that almost every nation is making automobiles and there is a worldwide glut. The current chairman of Ford Motor Co., Donald E. Petersen, estimates world overcapacity at 9 million automobiles a year. That's one reason he would rather export Ford Scorpios to Russia from the company's West German factories than bring on additional production by modernizing Gorky. But the potential Soviet market is so large and attractive that a compromise Soviet-Ford production deal is likely.

Meanwhile, the driving force in world industry is no longer the car but computers and communications--that is where the cutting edge of technology and competition is today. Henry Ford would have understood that. "The progress of the world has been in direct ratio to the convenience of communications," he wrote.

But it gives you some idea of how desperate Gorbachev must feel. He and his country are still trying to catch up to yesterday's technology.

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