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Czech Republic: How One Company Keeps Exports On Track

By Jiri Kominek

Prague, 29 April 1997 (RFE/RL) -- One of the most pressing problems faced by many enterprises in the Eastern European countries at the start of the new era was the slump in demand for their products on established markets.

The enterprises caught in this situation were faced with the choice of finding new markets or dying. But exporting to already-crowded markets elsewhere has been far from easy. The price edge usually held by products from the former communist states has often not been enough to dispel buyer concerns about such matters as build-quality, longevity, spare parts availability and after-sales service.

But a growing number of Eastern companies have found the right combination of business and manufacturing qualities to shape success on widening export markets. One such is MTH Praha, a manufacturer of specialised railway construction and maintenance equipment.

MTH Praha faced a large drop in demand from its traditional Socialist-era customers. Privatised in 1992, it had to undergo complex restructuring, and now has a staff of 630 workers.

As the company's chief executive officer Petr Wagenknecht told a RFE/RL correspondent, the Czech railway industry alone could not sustain a company such as MTH, "so we are forced to look anywhere in the world for potential customers."

An energetic and targetted approach paid off, as the company now exports to countries as diverse as the United States, Austria and Russia.

Just this month it secured a contract for $59 million with the Russian Railways Ministry for the supply over five years of special equipment including gravel bed cleaners and vegetation cutters. Also included in the contract is a single multi-purpose maintenance unit worth $5 million. According to company officials, if this multi-purpose unit successfully completes test trials in Russia, MTH Praha can expect an order for an additional 10 machines of the same type.

Wagenknecht says that although its not his company's first sale to Russia, it is seen as something of a landmark because of its size and because it was achieved against strong competition. Currently MTH Praha finds itself bidding on projects alongside the most highly regarded firms in the industry, including Plasser & Theur of Austria, and the Swiss manufacturer Matusa.

On the Russian deal, MTH Praha will manufacture the equipment together with PRMZ Kaluga, a Russian firm that will ensure that all parts will be designed to meet specific Russian requirements.

Wagenknecht says that Russia, with its ongoing railway expansion and modernization, represents the ideal type of partner for future sales opportunities. He says the only problem with doing business in the region of the former USSR is securing financing for projects. In the case of the latest order, however, the Russian Railway Ministry provided guarantees.

In 1994, MTH Praha had 71 percent of its shares bought-out by the Cimex Group, a subsidiary of Cimex Holding. That Karlovy Vary-based company, predominantly involved in real estate dealings, is said to have strong ties with Russian government and industry circles.