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Russia: Ford Sets Its Sights on St. Petersburg

  • Brian Whitmore

St. Petersburg, 19 January 1998 (RFE/RL) -- America's Ford Motor Company is very close to announcing plans to open a $150-million factory in Vsevolozhsk, in the Leningrad region. The final hurdle for the agreement is the availability of investment incentives from Russia's federal government.

Len Meany, Associate Director of Ford's department for new markets, tells RFE/RL that the company has been negotiating with Leningrad region Governor Vadim Gustov's government for almost a year, and hopes to make an announcement about opening a manufacturing plant sometime this year. Ford officials are very careful to stress that nothing has been finalized. Nevertheless, the company is very positive about the prospects for building a manufacturing plant in the Leningrad region, a region about the size of Ireland that surrounds, but does not include, St. Petersburg.

"We are very optimistic about the Leningrad Oblast (region) as a place to do business," Meany said in a telephone interview from his office in Essex, England, last week. Meany added that the only remaining major question in the negotiations involves the availability of investment incentives.

Meany said that the proposed plant would start by producing 25,000 cars per year, and, when it is in full production, would create some 2,000 jobs.

In 1997, Ford sold about 7,000 cars in Russia, a figure Ford officials sees increasing dramatically in the near future.

"Russia is going to be a future growth market, and we want to establish a presence there," said Tom Hoyt, a Ford spokesman in a telephone interview from Ford's global headquarters in Dearborne, Michigan. Hoyt adds that, by the time the proposed plant is up and running, there will be sufficient demand for 25,000 cars a year. "Henry Ford (the founder of Ford Motor Company) said we should build them where we sell them, so we want to build them in Russia. It is our hope and goal to move as quickly as possible," said Hoyt.

Meany praised Leningrad region Governor Gustov for making the region what Meany calls "investor-friendly," and a "very attractive proposition" for Ford.

Gustov has made attracting foreign investment one of the cornerstones of government policy, since his election in September 1996. In Summer of 1997, Gustov's administration enacted a new tax regime for investors that financial analysts predicted would bring a flood of foreign capital to the region. Analysts also described the law, that gives tax holidays to companies that do business in the Leningrad region, as one of the most investor-friendly tax regimes in Russia.

Companies that invest a minimum of six-billion rubles ($1.03 million) in Leningrad region can expect a full tax holiday from the regional portion of profit tax, road-user tax and asset tax, until their initial investment is recovered. Moreover, according to the new law, companies receive additional two-year tax breaks, depending on the size of their investment.

Initially, the proposed factory will assembly cars using imported parts. But the region's Deputy Governor, Valery Goloshchapov - who is also Chairman of the Committee for Economic Development - said that, in the future, the Ford assembly cars from parts made in the region and St. Petersburg-Leningrad Oblast.

Ford spokesman Hoyt says, "This investment should have a domino effect for new investments in the region. When the factory begins to source parts locally, the supply industry will also grow." And, Ford suggests the auto parts business could lead to the creation of an additional 20,000 new jobs.

The Public Relations Director for the St. Petersburg International Business Association, Christian Courbois, says he is "very excited that another prestigious company is coming to the region." Courbois says that, although it will be located in the Leningrad region, the city of St. Petersburg will also benefit. He describes the project as "much needed good news."

Matthew Murray, the president of a local management-consulting firm, said, "this helps promote the idea of this part of the country as a manufacturing hub."

And Ford officials say that - if and when - they come to Leningrad region, they plan to make a strong commitment to the region's development. "We have a philosophy that when we go into a new market to be responsible to the community," said Ford spokesman Hoyt. "Our strategy is not to be just in the community, but of the community."