07 March 2009

Touring Ukraine's Economy - Day 4 Odesa

08:00 Breakfast with Ilich at the Grand Hotel Ukraine, Dnipropetrovsk.

09:30 Exiting Dnipropetrovsk. The navigation, now my companion, is silent. Fog and white frost covered steppes on the road to Kryvij Rih. -4 DegC.

11:10 The sign reads welcome to Sofiivka. I’m willing to put money on a bet that Sofiivka is the most popular village name in Ukraine. I feel like I’ve gone through a dozen of them.

12:00 My first time in Kryvih Rih. The city immediately strikes me as neat and well kept. From the roads to the apartment buildings to the orderly landscaping by individual cottages. A mayor who cares perhaps?

The "Anti-crisis Staff of the Party of Regions" has a billboard campaign throughout the city. If I understand correctly the board reads: "In place of unreliability - trust(or confidence?)"

12:10 Kryvih Rih economic indicators. Not one but two McDonald’s with full parking lots. Good coffee "to go". Many small shopping malls, also full parking lots. A shiny new Renault dealership

12:20 Leaving Kryvih Rih I am looking for the road to Mykolaiv. The navigation system is as uncertain as I am, staying silent and then announcing, with an almost discernable sigh: “re-calculating”. I end up on a huge cloverleaf intersection which looks relatively recently built. Unfortunately there is not a single sign before any of the ramps indicating where the road may lead. The navigation seems unfamiliar with the new intersection and is staying quiet. I take the first ramp and wonder how it’s possible to spend millions of dollars on building this interchange and then not have the money to throw up a few signs?

13:42 The road from Kryvih Rih to Mykolaiv is ridiculously bad. The worst yet. Huge potholes all over the road and large missing swaths of road on the sides, the ancient fields well on their way to reclaiming the road. There does appear to be some concern for the cleanliness of the shoulder of the road, a sign reads "Thank you for the clean shoulders":

13:55 Novyj Buh. A village with a sign at the entrance that reads “Caution Intense Movement of Pedestrians”. There is no way to drive quickly even if I wanted to with all the massive potholes and undulations in the road. As I bounce through the center of town I see a large WWII hero statue and a little further down a silvery metallic statue of Taras Shevchenko.

14:00 I’m “jonesing” for a large Americano coffee from a McD’s. Using my phone I find one in Mykolaiv. I try to put it into the navigation but apparently it does not have a detailed map of Mykolaiv. There is a cool statue by the McD's in Mykolaiv. In memory of ship builders, sailors, navigators, and all those involved things nautical.

14:15 A green old truck with some kind of missile launching apparatus appears out of the fog. The plaque says it was used in the war in 1944.

Odesa. Our dealer in Odesa and his wife invite me to dinner along with another couple. They are warm and friendly “Odesyty”. The conversation begins as a spirited sharing of funny travel experiences. They are extremely well traveled.

The crisis is touched upon as a topic of conversation and a brief debate as to whether Ukraine will default or not ensues. One of the men, a clothing, watch, and shoe importer says sales are 20% off prior year. He did not seem too concerned with the downturn in the short term. The general theme of the conversation about the economy was a feeling of frustration that the leadership of the country was so incompetent. They raise the rhetorical question: why do we have to be such a chaotic country where there is absolutely no order, no rule of law, no stability?

Another couple joins the group and suddenly two of the men are discussing western Ukraine and their travel experiences there, almost as if it was a different country. They recount acts of great hospitality and friendliness. Then the conversation takes a political turn and the two begin debating the history of western Ukraine. One from the side of Soviet taught history, and the other from the western taught history (the way I learned it). By this time we have moved one floor down into a “whisky club” and were sampling whiskies. They are amazed that an American can speak Ukrainian but not Russian. One of the men starts proudly speaking broken Ukrainian much to the teasing banter of the rest of the group. I sit mostly quiet while the debate about the history of Halichyna and western Ukraine continues and try to grasp the point of view of Soviet history out of curiousity. When directly asked, I recount the history the way I learned it from my parents and from the Subtelny book.

Then back to the humorous travel stories such as this one: somewhere while driving on historic route 66 one of the Odesa couples had stumbled across a space museum. In the museum was an exhibit about Soyuz-Apollo mission (known as Apollo-Soyuz to us). In the exhibit were two bottles of alcohol. Apparently when the two ships docked in orbit, the Soviet Cosmonauts gave the Americans a bottle of Vodka, and the Americans gave the Cosmonauts a bottle of whisky. Today, in the exhibit the Vodka bottle is full, and the whisky bottle is almost completely empty. Signed by all the Cosmonauts, but empty.

09:30 Sunday. A brilliant sun is out in the Odesa morning. We walk by the beach in the Arkadia part of town. Then we stroll past all the colorful, thematic bars now closed and boarded up for the winter. The Black Sea glistens in the sun. Sea gulls fly in groups around the pier. A line of cargo ships queues on the horizon.

The road to Kyiv is one of the best roads in Ukraine. The ride is smooth and peaceful. The Ukrainian steppe sprawling on either side of the road covered in snow. The sun pokes through the clouds but only in swathes, like huge floodlights from the heavens illuminating parts of fields, groves of birch trees, and rows of little cottages organized along meandering creeks, clinging to the gentle undulations of the black earth.

Despite the inept politicians, lack of leadership, and rampant corruption, I remain in awe of this country and its people.

Touring Ukraine's Economy - Day 3 Dnipropetrovsk

07:20 Hotel Victoria, Donetsk. I open the curtains. Everything I see is a shade of gray. I turn on the T.V. and flip through the channel line-up twice. There appears to be no Channel 5 (Piatyj Kanal). Maybe it's not broadcast in Donetsk. I do find a talk show that happens to have Ilya (Chychkan) and Masha on it.

08:50 Road to Dnipropetrovsk. This will be the shortest leg of my trip. The roads are in decent shape. Several road crews repair the many post-winter pot holes. Does it make sense to fill potholes in sub-zero temperatures?

In Dnipropetrovsk the Party of Regions has a solution to the economic crisis. If you get laid off sue your employer. Oleh Zareva's Center for Social Programs will help you to "Defend Your Right to Work!" reads the billboard.

Vladimir Ilich Lenin, circled by the capitalist advertising of UkrSibBank, NOKIA, and others looks over a makeshift parking lot in the center of Dnipropetrovsk. I keep my eyes open for social unrest and don't see any, at least not today. Today shoppers are still parking in front of Lenin and scrambling into the TSUM (Tsentralnyj Univermah) Department Store.

Beyond Lenin's parking lot is a shopping mall under construction. Crews were working and the cranes were moving.

There are a few "For Rent" signs on recently closed retail businesses on Dnipro's main street. The retailers that are still open have plastered their windows with large sale and discount signs. A sign of the times: "Final Sale"

16:30 Meeting with our Dnipropetrovsk Dealer. The conversation revolves around the lack of credit availability at banks and how it's stifling his business and those of his friends. Demand for luxury products has evaporated he says. He is heavily invested in luxury vehicle brands and owns multiple dealerships. Fortunately, those facilities were not built with borrowed funds, nor were they leveraged for other investments. This supports the going theory that Ukraine has not had a chance to fully develop into a highly leveraged society, as opposed to other Eastern European nations like Poland, Bulgaria, and Hungary. Our meeting ends punctually. He is a big Deep Purple fan and Ritchie Blackmore's band "Rainbow" are performing tonight. A sold out show in Dnipropetrovsk at UAH 400 per ticket.

18:50 On the way back to the hotel, I stop for a look around his latest dealership built for a luxury Japanese make. The service manager gives me a detailed tour of the workshop and is very kind to answer all my questions. I am most intrigued by the Japanese 5S Methodology poster on the wall. The text is in Ukrainian short of the five Japanese words.
"It's part of our Kaizen" explains Vadym handing me a book about Kaizen in Russian translation. "It's truly a great thing. We work on it together".

The cleaning lady, rests on her mop, and having overhead our conversation asks if I'm from Western Ukraine. She herself is originally from Rivne. Has she felt the impact of the financial crisis? So far so good she says. She is still employed and so are her loved ones.

I make my way back to the hotel pondering the fact that I apparently know one of the world's few, or possibly only, non-leveraged car dealer. Kaizen.

04 March 2009

Touring Ukraine’s Economy – Day 2 Donetsk

08:00 Kharkiv. The buffet breakfast in the basement of “Art Hotel Cosmopolit” is packed with Germans. They are talking business from what I can gather.

09:00 I take photos of our dealer’s construction site. Another silent half-completed structure except for a few workers welding something probably for my benefit.

09:42 DAI. I am quasi-lost seeking the exit from Kharkiv in the direction of Donetsk. The navigation keeps saying “Re-calculating, Re-calculating”, looked left, nothing, made a right, notice the red light after making the turn…only to find myself at one of those little two story DAI posts with a smiling DAI guy waving his stick at me. I play the foreigner card and he, remarkably, lets me off with a warning.

10:30 Pass the huge Philip Morris Factory. Middle of nowhere. Try to take a picture of it, but it’s really flat and long. Needs a different kind of camera.

11:11 DAI pulls me over. Second time. A road block type situation in which they are pulling over all cars that have out of town plates. He explains that there was a crime involving guns and asked if there are guns in the car. No. Ok. Company car? Yes. You have all the docs. Yes I do. Ok have a safe trip. Ok thank you.

12:20 Donetsk Oblast, AVIAS gas station.
After using the clean bathroom, I ask Sasha the pump attendant:
“Have you felt the impact of the global economic crisis?”
“What do you mean?”
“Have you seen a drop in cars and trucks traveling on this highway?”
“No, not really,” Sasha smiles and then becomes serious, “people are who own cars aren’t going to stop using them are they? Just let their cars sit there?”
Clean bathroom:

13:00 Snow covered fields. The sun makes an appearance. Long orderly rows of Topoli (English name?) line the road. I am struck, yet again, by the natural beauty of Ukraine and a recurring urge to don a pair of cross-country skis and go in a straight line for miles.

13:30 Driving through Kramatorsk, Donetsk Oblast, population I’m guessing around 200k, I’m fascinated by the massive, sprawling New-Kramatorsk Machine building Plant (Novo Kramatorskiy Mashynobydivelniy Zavod - NKMZ). After passing dozens of rotting, defunct Soviet era plants it’s great to see one that is still operational. The plant stretches for miles. Smoke coming out of various chimneys indicating life. The administrative building has been revamped with new windows and, in an apparent attempt at branding, there is are many new “NKMZ” signs consisting of huge navy-blue bloc letters.

13:35 At the edge of Kramatorsk, I stop at the “Art Nirvana CafĂ©” for a cup of coffee. It’s an empty, formal restaurant with table cloths and all manner of fancy napkin folding in the glasses on the tables. Intimidated by the pristine table tops I sit on one of four bars stools by the small bar in the back. Anton appears happy to have a task to do as the Saeco coffee maker loudly grinds the exact portion of coffee beans required.
“Have you felt the impact of the global economic crisis?” I ask.
“Not really, business at the restaurant is the same,” replies Anton.
“What about the plant? How many people work there anyway?”
“About 45,000. I haven’t heard of any layoffs. There are several other plants in Kramatorsk as well.”
I sip the 14 Hryvnia coffee and ponder its value. Last August $2.80, last month $2.00, and now judging from the rates I saw at an Obmin leaving Kharkiv, less than than $1.40.
“So I imagine you are a Yanukovych, Party of Regions fan?” I ask. The word I use for fan is “bolivalnyk” stolen from soccer terminology, a hopeful linguistic stretch.
“Sure am. Kramatorsk voted 99% for Yanukovych,” says Anton proudly.
I recall the allegations during the O.R. that factory workers were instructed to vote a certain way – or the factory may shut down.
“Who knows, maybe he’ll become president while Yushchenko and Timoshenko fight each other,” I speculate.
“That would be great.”

15:10 Donetsk. Dima (not his real name) our dealer in Donetsk is a smart, young guy. Bright and talkative. His father, a coal-miner (Shakhtar) died of a heart attack leaving Dima to provide for his mother and his little brother. He’s a new breed of Ukrainian businessman of the non-smoking, non-drinking variety:
“How could I drink when my father died of a heart attack and I had a nine year old brother and mother to look out for? Between work, night school, and sports I had no time to drink. Now that I have a little time for social life, it’s like I don’t have the skills to ‘party’ or drink with my friends. The whole thing seems odd to me. Like people willingly letting go of their minds.”
Dima rambles about “the customer experience”, about how he trains his team to work on first impressions, to be helpful and courteous to customers, to listen to their needs, and so on. I've lived in Ukraine too long to automatically get enthused by his words. Is he rattling off what he thinks I want to hear, or is he genuinely a standout?

“Watch this” he says as he maneuvers into the right lane and veers off in front of a decrepit Soviet era building with a huge Mercedes-Benz sign on it. Above the sign, the pukey yellow bricks are crumbling, in front of the “dealership” are five new Mercedes covered in two day old snow. We exit the car and walk to the door of the showroom.
“This is the official Mercedes dealer in Donetsk” he says.
A sign hangs on the inside of the glass door: closed (zachyneno). I look at my watch. 6:03 PM. A sticker on the door reads 9-6. Dima tries the door since there are still sales people inside and the lights are on. It opens and we walk in.
“We’re closed!” yells a sour faced sales consultant rising from behind his computer.
“I have a budget for new car and I was thinking…” I say.
“We’re closed!” he cuts me off, “come back when we’re open!”
“Can I leave you my contact information? Do you have a card?” I add.
“Just come back when we’re open.”
Back in the car Dima starts fumes about the encounter.
“You see how primitive it still is here? God forbid if that should happen at any of my dealerships. I’ve fired people for not answering the phone by the third ring,” he reflects for a minute while nonchalantly swerving around a big blue Kamaz, “I just don’t get why people don’t see that the answer is simply to work hard. The guy doesn’t want to work, but he’ll be the first one protesting on Lenin Square saying wages are not fair.”

Not a protestor to be seen on snowy Lenin Square, Donetsk:

Mario restaurant sits on top of the latest office tower built by Rinat Akhmentov, local billionaire. The restaurant is not empty. At one table four grim, grumbling, overweight men sporting Yanukovych haircuts huddle around a clear glass decanter of vodka and tall glasses of tomato juice. At another, a well-dressed family sits politely, with an air of formality, often taking turns standing and making a toast no doubt acknowledging some date or achievement. Nearest to us is a grey haired American man in jeans and a sweatshirt sitting with a primped young lady in heels and an evening gown and another young lady translating. In all, there is way too much cologne and perfume in use for the size of the room.

Dima orders and a salad, veal medallions, and a “fresh”. When the waiter turns to me, Dima chuckles to himself.
“You didn’t ask me what kind of fresh!” Dima says to the waiter.
The waiter looks puzzled at first and then begins a long rationalization. Dima looks at me while the waiter is spinning the situation, and then back at the waiter.
“It’s not complicated, I ordered fresh it would be logical to ask what kind. That’s all,” he says calmly.

I ask about the mines Dima’s father worked in before his heart attack. There were days, explained Dima, that his father would spend his entire shift on his knees struggling with the hydraulic jackhammer because the tunnel was only 1.5 meters high. If not on his knees, it was common to be standing knee deep in water for the whole shift. Rats were like best friends. Why would someone become a coal miner? Because they are proud of the mining tradition and enticed by early retirement after 20 years service.

I bring up politics and Dima doesn’t really want to go there. He says he’s interested in it but there is no one who has an idea for Ukraine that he can get behind. He is clearly impressed with Rinat Akhmetov and frequently references Akhmetov’s contributions to Donetsk. He is proud that Donetsk will soon open the best stadium in Ukraine, the best airport, etc. Driving me around Rinat’s compound, earlier, Dima explained, with great detail, the construction of the five meter walls encircling the estate. Thickness, steel reinforcement, and so on. Half his compound is protected state natural park (zapovidnyk) he says, but no one can touch Rinat.

Mr. Akhmetov's stadium project:

I leave Donetsk with many questions unanswered. The son of a coal-miner, born and raised in Donetsk understands what it means to be “customer focused” better than most Americans and Europeans I know. How is that? And what’s with the city itself? Is it a real, vibrant and energetic economy at work or a Rinat Akhmetov theme park? A pet project of popping up shopping malls, hotels, a stadium, airport etc…Is it a model of how Ukraine can be built or the path to a grumbling dictatorship in a cloud of cologne?

02 March 2009

Touring Ukraine’s Economy – Day 1 Kharkiv

In Kyiv it’s obvious the global economic and financial crisis has hit Ukraine. But what’s happening out there in other Ukrainian cities? It’s been six months since my last business trips to our regional dealers, and even those were short, flight in the morning, meeting, flight back in the evening type trips. This time I travel by car starting with Kharkiv, then Donetsk, Dnipropetrovsk, and Odesa staying one night in each city. I estimate 2000 km in total. My goal is to get a top-level, quick feel for how these Oblast centers are faring.

My borrowed navigation system (thanks ROK), insists on calling Kharkiv Charcow. The female voice calmly instructs me: “Continue straight 466 km and turn right, in Char Cow”.

There are noticeably less trucks on the road than I remember from prior road trips. Less consumption, less manufacturing, less shipping, less cargo on the roads of Ukraine. Exiting the city of Borispil, I find myself surrounded by empty billboards on both sides of the road. This goes on for a couple of kilometers. Sporadically, amid the looming grey boards are new Party of Regions billboards: “Enough noise (halas?)…let’s get to work” and other such doosies along with one aged independence day greeting from President Yushchenko, the kind with his signature scrawled across it.

Dozens of small towns (selos) appear and disappear. Yellow gas lines thread their way across the otherwise picturesque snow covered cottages. A bundled up babushka sits on a stool by the side of the road in front of a bucket of potatoes and bucket of carrots. Same as during boom times. These villages have many problems, sub-prime loans are not among them.

Poltava. I become melancholy on the approach to Poltava. I wonder what it was like in these fields in the Summer of 1709. The masses of Swedish and Russian infantry, cavalry, and artillery advancing in long lines to gruesome deaths. Nine thousand soldiers lost their lives in these fields now traversed by the Kyiv-Kharkiv road. The Swedish dead were buried where they fell, the Russians buried their dead in a mohyla – which, oddly, today bears the name “Swedish Mohyla”. I imagine the Zaporizhian Cossack contingent joining ranks with the Swedes with the dream of ridding their land of the Russian yoke only to find themselves up against Cossacks of other orders fighting for the other side. I contemplate this as I walk into Poltava McDonald’s for a coffee. 300 years of progress and we’ve made it from muskets to McNuggets.

Scenes from Poltava McDonald's:

The recently built McDonald’s was done in that new McD’s style like the one I saw in Berlin. Poltava has the coolest McDonald’s I’ve ever seen. Try it. Regarding the economy? The parking lot was full and there were lines at the cash register.

In Kharkiv there is no construction work being done on any of the construction sites I pass. Cranes and back hoes are motionless. Car dealerships are open, but visitor parking lots are empty and there are no people in the showrooms. Shopping mall lots are full.

I meet our dealer and embark on an eight hour marathon of second-hand smoke inhalation and increasingly belligerent Russian language and spirited laughter. The restaurant is empty except for us. I witness him work his two phones continuously, at times simultaneously, with one on each ear, cigarette dangling from his mouth working deals, negotiating.
“Are you nuts? For that kind of money I can buy half of Kharkiv right now. Call me when you are ready to talk.”
Laughter. The general topic of conversation is how everyone has stopped spending money and is waiting for something to change. There is no credit money. Banks are failing. Then on to a conversation about the Tax inspectors, corrupt local politicians and so on. I felt like I had traveled back in time to 1995 Ukraine.

The night ends outside the hotel. He leaps out of the car to say goodnight, lights another Marlboro. I look up and see a clear, star filled winter sky. I am happy to be breathing fresh air. After a pause, he becomes melancholy and issues a final lament about the Hryvnia:
“If only they devalued it once. Let it devalue as much as it has to, but do it once. Then at least we can start from there. These sporadic devaluations keep us in a continuous feeling of anarchy. What will we do Petro? What will we do?”
Then he erupts into laughter, hugs me violently, and zooms off into the distance in his 140k EUR imported car.