Giant car firm steers chaotic sell-off course: Andrew Higgins in Nizhny Novgorod reports on a privatisation scheme designed to keep outsiders out

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The Independent Online
IVAN ROBAZOV worked as point man with the market for GAZ, car-maker and near bankrupt behemoth from Russia's Volga River rust belt.

The stress got to him. Two months ago, the 40-year-old sales director woke up, walked the dog and then shot himself through the heart with a double-barrelled hunting rifle. His wife found his the body on the floor of their flat.

These are traumatic times for the Gorky Automobile Works, famous across Russia as purveyor of Chaika limousines to the Kremlin, Volga sedans to an army of more modest bureaucrats and armoured vehicles to the military.

Built in 1932 with blueprints from Henry Ford and trumpeted as a triumph of socialism by Joseph Stalin and Leonid Brezhnev, GAZ now finds itself convulsed by a grab-all- you-can brawl befitting the most rapacious robber baron.

The plant director, Boris Vidyaev, is fighting to keep his job and stay out of jail. The regional governor, Boris Nemtsov, is after him. Tax police are on the prowl. Workers are restless. Billions of roubles are missing. Ministers in Moscow are pulling their hair out.

GAZ stands accused of a spectacular scam: an elaborate shell game with state cash that allowed it to defer paying taxes, syphon off money earmarked for investment and gobble up company shares in a rigged privatisation.

'I'm sitting on a powder keg. It could blow up at any moment,' says Mr Nemtsov, reformist governor of Nizhny Novgorod province, formerly Gorky, and sworn enemy of GAZ's management. 'This is the most difficult problem I want to solve. They are a mafia, an honest-to-goodness Russian mafia.'

When the marketing executive committed suicide in January 45,000 trucks stood unsold in the snow. GAZ had a mountain of debt. Its two main customers - state farms and the military - were broke. Old bills were unpaid, new orders scrapped. The plant had somehow managed to pay salaries of 107,000 workers and could boast one modest success: production lines shut down for days instead of months as in much of Russian industry.

This bleak outlook has only intensified the struggle for control. Managers and workers were terrified that privatisation could cost them their jobs. They banded together to block outsiders.

At stake are 350,000 people. Also on the line are 10,000 cows, a Black Sea sanatorium in Sochi, 120 kindergartens, a 1,100-bed hospital, a fish farm and vast stocks of sausages - all the extras that make GAZ not so much a business as a small state.

Like other wheezing industrial plants sold off in Russia, the Gorky Automobile Works has done all it can to defend its territory from interlopers. 'Most enterprises use similar methods,' argues Yevgenny Tsiberev, GAZ deputy director. A government commission, though, ruled last month that GAZ had strayed far beyond the law. It accused the plant of using dollars 30m ( pounds 20m) intended for investment to buy 1.8 million privatisation vouchers, the government-issued chits that are used as currency in Russia's chaotic sell- off of public assets.

Through 15 proxies, GAZ secured half of the shares up for sale on the market, giving management a 30 per cent stake instead of the usual five. A further 25 per cent never went on the market but straight to workers, an option sanctioned under rules widely criticised for making too many concessions to the status quo.

GAZ alleges a personal vendetta by Mr Nemtsov, who has presidential ambitions and has staked his reputation on being able to impose his own man as boss at the plant. He wants the job for Nikolai Pugin, a GAZ veteran who left the company to become the Soviet Union's last car industry minister. He is hardly a model reformer.

Whatever Mr Nemtsov's grudges, a vital issue is at stake: can privatisation change who runs Russian industry and how? More than 8,000 medium and large-scale enterprises have been sold off in Russia since December 1992. A further 4,000 will go private by summer. On paper, the change of ownership is as sweeping - and far more rapid - than anything brought about by the Bolsheviks after 1917. But in most cases little has really changed. Nearly all newly- privatised factories, including other car makers such as ZIL, remain firmly in the same hands - and run in much the same way - as before.

'Why should outsiders be allowed to tear us apart?' asks Alexander Suslov, GAZ's head of economic planning. 'We want the work collective to have a controlling stake.' So do trade union officials, now in tight alliance with management. 'We can't just give away capital gathered over 60 years,' says one union boss, Yuri Kulyonin. 'Why are we washing our dirty linen in public? Families should try to resolve their quarrels at home.'

Mr Nemtsov disagrees: 'Instability in this factory means instability for the whole region. If this were just a pantyhose plant I wouldn't mind. They must change.'