Out of Russia: New-style raider goes to work on old-style factory

MOSCOW - Most Russians prefer to spend summer pottering around the dacha. The more adventurous venture to the Black Sea, though fear of being shot in somebody else's civil war can darken even the sunniest Soviet beach resort.

Altogether more eccentric, and perhaps more daring too, is Joseph Bakaleinik, a mild-mannered Russian economist with quirky notions of holiday fun. He spends most of the year in Washington DC, where he works for the International Finance Corporation, a branch of the World Bank.

This summer he returned home for a vacation - and to launch a hostile takeover bid against a rusting factory.

Armed with a degree from Harvard Business School, the backing of Renova, a holding company run by a friend (and fellow Harvard graduate), and his own personal recipe for salvation (entitled 'A Healthy Economy: The Foundation of Prosperity'), Mr Bakaleinik has spent his holiday wooing shareholders at the Vladimir tractor factory, one of more than 2,000 big state firms privatised this year.

His first assault failed, though he did grab a seat on the board of directors and a voice in the firm's finances. Also secure is his niche in the history of Russian capitalism - the prime mover in a very public and very prickly clash between Bonfire of the Vanities ambition and the crumbling but still, for some at least, comforting certainties of Das Kapital. His struggle for Vladimir Tractor marks the first full-scale exercise of its kind.

'My enemies portray me as an American invader,' he explained. 'They say I am just a greedy capitalist who wants to increase dividends and sell off their assets.' I ask him if they might not be right. 'This is a very complicated question,' he replies, keen to sound a lot more ruthless than I suspect he probably is.

The first engagement in what promises to be a long fight for Vladimir took place two weeks ago in a local football stadium, venue for the company's first meeting of shareholders. Mr Bakaleinik, who worked at the firm as deputy director for seven years before going to Harvard, put forward a modest proposal - dump Anatoly Grishin, tractor boss for the past 18 years, and install him instead. He denied wanting to lay off anyone else and promised to increase profits and pay by attracting outside investors. His motive for mercy was clearly not kindness: 'Labour is cheap. Why bother firing people? You save peanuts; just pocket-money.'

Workers and management, who together control 48 per cent of the shares, were not impressed. They voted en masse to preserve the old order and, they hope, their jobs. But Mr Bakaleinik did his best. From a bus parked outside the factory gate, he promised to pay any shareholders willing to surrender voting rights. It was not enough. His backers at Renova could get their hands on only 12 per cent of the shares.

Mr Bakaleinik now cries foul and accuses Mr Grishin of using free sausages and bully-boy tactics to ensure workers rejected change: 'It was the standard Soviet combination: threats and promises.' The battle, like many more that will certainly follow, looks set to run and run. Mr Bakaleinik vows not to give up, though the end of his holiday may force a pause. Mr Grishin insists on remaining boss. Relations between the two men are not good. 'We speak to each other, but obviously we are not very friendly,' says Mr Bakaleinik. There are powerful forces working to keep it that way.

Alpha Capital, an aggressive investment firm which controls 10 per cent of Vladimir Tractor, wants to make sure they stay at each other's throats. The reason is simple: so long as there is a fight for the director's chair, share prices can only go up. 'The bigger the conflict, the bigger the profit for us,' explained Alpha Capital's 24-year-old finance director, Igor Smolkin.

And it is probably with people like this, not Mr Bakaleinik and certainly not Mr Grishin, that Russia's future lies. I would not be surprised if both decide to spend next summer at the dacha.