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True Grit in a Sale to Czechs

July 15, 1990|JONATHAN PETERSON | TIMES STAFF WRITER

Sometime in September, a freighter will cruise into the West German port of Hamburg stacked with eight 40-foot containers of electrical equipment from San Diego County. The cargo will be loaded onto flatbed trucks or rail cars, hauled almost 300 miles to the Czech village of Raspenava and housed in a shiny new factory.

And therein lies one of the more remarkable tales in the annals of East-West trade.

"I'll be there to usher the ship to harbor," jokes W. Mark Heiden, chairman of Incetek, the California firm that is selling the goods to Tesla Electronics in Czechoslovakia.

So you wonder whether America's capitalists still have the fire to seize far-off opportunities, such as the markets opening up in Eastern Europe?

Here's a story where success required the help of bankers in Stuttgart and Prague, an unidentified European investor, an Oregon trading company, eager Czech officials, a sophisticated Swiss financing technique, half a dozen trips across the Atlantic and a very large imagination by all concerned. With one exception, U.S. banks chose to steer clear.

"I can't tell you how far-fetched this thing was when we first got into it," said Tom Hodge, marketing director of World Trade Finance, a Los Angeles firm that provides export financing. "But son of a gun, it all came together."

If the opening of the Iron Curtain has created new markets for U.S. companies, tapping them is no minor feat. Americans may search in vain for banks willing to finance their production costs, even when an East European customer is waiting.

What's more, the East Europeans have precious little "hard" currency to buy things from the West; their locally minted money has little value beyond their borders.

Outsiders may find the obstacles to business hard to believe. When the Incetek contract was about to be drawn up in Prague in 1989, for example, negotiators hit an unexpected, two-day snag: No available typist could be found for miles around.

The challenges require a sort of creativity rarely needed by Western executives.

Right now, World Trade Finance is trying to arrange a swap of Hungarian dairy cattle for telecommunications equipment made in Orange County. The cows would go to buyers in Saudi Arabia and other countries, providing Western currency that Hungary could use to pay the Santa Ana firm, a client of World Trade Finance.

"We've already spent a lot of time trying to put this thing together," Hodge said. But, he conceded philosophically, "it's a long shot."

Sometimes the stumbling blocks seem overwhelming, especially for smaller companies. Earlier this year, a Bulgarian bank guaranteed Food Engineering Service of Irwindale $1.5 million for equipment that makes powdered foods. But the sale--which the Bulgarians have promised to pay for in U.S. dollars--is languishing.

The San Gabriel Valley manufacturer needs financing to produce the order, and American banks have declined to provide it. The bankers "don't trust" the stability of Bulgaria, explained Rick Smith, vice president of Food Engineering, which is also pursuing separate sales in the Soviet Union and Czechoslovakia.

Despite the hair-pulling frustrations, interest in the emerging markets of Eastern Europe is on the rise. A new poll by Opinion Research Corp. of Princeton, N.J., found that 35% of America's largest companies plan to broaden their activities in the region this year.

U.S. firms already export more than $5 billion worth of products to Eastern Europe--mostly to the Soviet Union--according to the Commerce Department. While that amount is dwarfed by the $100 billion in exports to Western Europe, business clearly gets done.

Incetek is proving it in a small industrial park north of San Diego, where the red, white and blue Czech flag now flaps next to Old Glory. Inside, eight Czech engineers huddle around a table, learning all about ceramic chip capacitors--a tiny part used in digital watches, computers and other electronic products.

After the engineers go home this summer, they will make sure that the U.S. equipment, which produces the rectangle-shaped components, is used properly by Tesla, their employer.

Such international deals are "just a matter of making the contacts and putting the right people together," declares Incetek President Walter B. Merriam, a plain-speaking Connecticut native, who has exported electronic equipment to China, South Korea, India, Portugal and Japan.

In this case, putting the right people together took three years. It all began when Tesla officials approached Merriam at a trade show in Munich. Their interest: Machinery to make chip capacitors could help the Czechs produce a product in demand throughout the world, bringing sorely needed hard currency into the country.

And U.S. export restrictions on the technology were not an issue. The ceramic devices--which store and release electrical current--have no special military value, Merriam said. He began planning to sell Tesla an entire factory system to produce them.

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