Radiotehnika Strives For Place In Market

Hanging from the ceiling, just below the rows of fluorescent lights, was a sign that easily measured 20 feet across. In bright red letters it urged us to work harder for the glory of the state: ``The Eternal Ideas of Lenin - Forever Live and Triumph!''

In case we needed more urging, another huge sign showed the hammer and sickle, and the proclamation, ``The Working Man - Our Greatest Asset!''

Beneath were rows of work tables at which employees in white lab coats sat. In front of each were little boxes filled with electronic parts. They were making radios. Nobody was looking up to the signs for motivation.

Fourteen thousand of them worked at Radiotehnika, a factory sprawling over several buildings, producing speakers, stereos and other home electronics.

I stopped to ask a question of a line supervisor. I asked what the rejection rate was for these parts. I asked the question several times, because I couldn't believe the answer. The supervisor couldn't be telling me it was 95 percent. Products made in the Soviet Union don't have a good reputation, but 95 percent seemed a bit much.

The supervisor explained the numbers again. ``Out of 200, 10 go without a problem,'' she said, which did mean a 95 percent rejection rate.

I asked the supervisor what was causing so many problems. She shrugged. Radiotehnika gets supplies from 130 factories around the U.S.S.R. In Marxist planning, you don't get much choice as to your parts supplier. Just be thankful to get the parts at all.

Sometimes a parts factory in another republic won't even ship the goods - or accept your finished radios for sale in that republic - unless you can also arrange for your region to ship, say, some scarce meat.

That's what the communist economic collapse had come to: a return to bartering. Radiotehnika wasn't an isolated example. A manager at a farming collective, for example, told me about the problems it was having in producing a popular sparkling wine.

The concentrate for the wine came from a collective in Moldavia, a southern republic. That collective didn't want to get paid in rubles. Rubles were worthless. It wanted potatoes.

``It's very hard for foreigners to understand. You operate in a logical system,'' Vladimir Martinson said. At 53, he is director of Radiotehnika. He has worked there two decades, a good portion as head engineer.

Walking through Radiotehnika, you don't see many outward dissimilarities to a Western factory. On the assembly line, drilling the same screws over and over again is about the same the world over. Where you noticed the differences was in the cafeteria food. Lots of black bread, cabbage soup and and a gelatin pork meat dish. Not quite hamburger and fries.

The problem with this factory is that it makes goods that would have a hard time selling in the West. Even the cheapest stereos sold in the West have synthesizers and microchips. These are not available to Radiotehnika.

You pick up one of its table-model radios, and it literally weighs twice as much as anything sold in the West, the result of clunky, outmoded electronics that still uses metal instead of plastic.

Martinson sounded remarkably optimistic considering the obstacles. The great hope in factories is to somehow manufacture something that will sell in the West. That will bring in the hard currency so desperately needed.

A while back, some German businessmen went through the factory, trying to find something they could market. They decided on speakers, of which the factory is quite proud.

The best of the speakers will be sold by the Germans for $400 each at retail, which obviously puts them in the high end. The Germans believe they can get that price. The speaker cabinets are made of real wood, not particle board, and they produce excellent sound. Radiotehnika can make speakers without relying on a supply of shoddy electronics from other republics.

The Germans obviously considered the marketing problems of selling goods from a Soviet republic. To make sure no customers are scared away, the speakers never state exactly where they're manufactured, but say simply, ``Made in Europe.'' They're also marketed under the brand name ``Norsk,'' which might make a customer believe they're from Scandinavia.

Martinson wasn't insulted that his factory wasn't receiving credit. He just wants to sell to the West. The Germans ordered 10,000 speakers. For this coming year, Martinson hopes to sell 15,000, plus an additional 100,000 cabinets for the do-it-yourself market.

I asked how much the factory was getting for the speakers. He estimated the Germans were marking them up 75 percent.

``But the answer is not simple. Foreigners have trouble understanding this,'' he said. ``We have two courses. There is the official one, and there is the real one.''

The arrangement with the Germans had never gone through Moscow, even though the factory is supposedly under control from a ministry in the Soviet capital. ``Every day I get a fat packet from them,'' Martinson said of orders from Moscow.

And what did he do about those orders? ``I don't react.''

When Moscow gets involved, it usually takes a fat cut. Martinson wants to reinvest profits in the factory, a concept alien to the central planners.

Through a complicated arrangement, the speakers going to the Germans are sold for rubles, so officially the factory gets no hard foreign currency, which might pique the interest of Moscow. But in reality, the Germans are providing the factory much needed modern factory equipment.

Now the Germans have ordered 2,000 power amps from Radiotehnika. To make sure no malfunctioning goods are delivered, Martinson has ordered that every amp be tested for 24 hours, instead of just random samples as is usually done.

He knows future orders are at stake, and he knows his factory doesn't have much time. He wants to compete in the West, and he knows Radiotehnika managers lack some basic business skills. He himself is just learning marketing skills. So far, he has taken a marketing course in Denmark.

``We have proposals from Sweden to train people in bookkeeping (Marxist bookkeeping had nothing to do with reality since the actual cost of goods didn't matter), but we couldn't find any young people who knew English. It is impossible to enter Western markets without knowing English.''

So nobody has to tell Martinson it's going to be tough.

But he thinks he knows how this factory will survive. It will make the goods cheaper than anyone else.

``That's how South Korea and Singapore and the rest did it. Now it is our turn,'' he said.

At what the ruble is worth in the real world, they can compete. Martinson's salary is 552 rubles a month. At black market rates, that's maybe $25.

I asked Martinson the question I asked of everyone I met in Latvia. Wouldn't the central planners in Moscow do something to hold onto their power? I keep expecting a massive show of armed force. Would they let go after 50 years of power?

``The process can't be stopped,'' Martinson said. ``Even those who ran it recognize it wasn't working. There is no turning back.''

Then he was running off to his next meeting. Fourteen thousand jobs were at stake.