Lennart Samuelson describes in his book Tankograd: The Formation of a Soviet Company Town: Chelyabinsk, 1900s–1950s, the details of this internal affair. In 1930, Kazimir Lovin, the future Chelyabinsk plant director, was sent to the US and the UK together with a group of 40 specialists to study Caterpillar, Allis-Chalmers and other manufacturers. Candidates for the trip had all been selected by the local Communist Party, and underwent a short English course. They were joined by workers from the future Ford plant in Nizhny Novgorod, whose task was to absorb the latest advances in automotive manufacturing. A license production model was chosen. On that basis, a floor in one of Detroit's skyscrapers was rented out to host the design bureau of the Chelyabinsk Traktorplant. Russian and American specialists worked side by side to design a completely new plant.
By 1931, the technicians and workers had completed their training and returned to Chelyabinsk, where the assembly and installation of buildings commenced, on the basis of designs made in Detroit. The first tractor produced in Chelyabinsk was in many ways a copy of a Caterpillar tractor (model 1925-1931, 60 horsepower). The Russians gave it the name Stalinets-60. In World War II, many found military employment, towing guns and other heavy equipment.

Eight decades later, a joint venture (JV) was established in Chelyabinsk—TOP JSC. The business model was different, but in essence, the experience of our grandfathers was being repeated. From 2014 to 2016 and in collaboration with the Italian partner, Termomeccanica (owner of a 25% stake in the JV), a cutting-edge manufacturing facility was built. The site was that of a dilapidated Soviet plant, which had just had turned 80 years old. The European partner transferred technology, which is seen in Russia as a key component of international partnerships. Latest manufacturing technologies were implemented, such as hydrodynamic analysis and a unique test center processing several hundred control signals to monitor the functioning of pumps, electric motors, frequency converters, and heat exchangers. The JV also worked with leading global suppliers including Siemens, Voith and Ebara. For Termomeccanica, the project was a success as the JV's trunk pumps for oil and water achieved significant market share in Russia and the CIS.

There is a systematic approach to international partnerships in manufacturing which is based on long-term institutional support. The Kaluga region represents a case of best practices in this regard. The city used to be a trading post in the 19^th century thanks to its location on the road that connected Kiev to Moscow, which is just 170 km away. This dormant area of 1 million inhabitants, of which about 330,000 live in Kaluga city, elected a new governor in 2000. With his appointment confirmed by the President in 2005 and still in office today, Anatoly Artamonov exemplifies the impact that enlightened officials can have on modern Russia. His goal was to turn Kaluga into a hub for large-scale manufacturing. His first step was to surround himself by a young and capable team of regional managers.
Artamonov realized his goal of developing Kaluga. The local government built an administration that was welcoming, fast and flexible, one that went to work with foreign investors. Over 150 firms have by now established facilities there including heavyweights such as Volkswagen, Volvo, PSMA (a Peugeot Citroën and Mitsubishi JV) and Continental. There are even two Chinese enterprises; FUYAO Glass invested EUR 2,000 million in a glass plant; and YAPP, a producer of gas tanks, also opened a facility. The educated, relatively cheap workforce is a point of attraction. The quality of life in the Kaluga region is in some regards higher than Moscow thanks to lakes and forested areas that allow for outdoor dacha lifestyle possibilities. In addition, costs are lower than in Moscow with apartment prices just 40% of those in the capital.
Kaluga's transformation is also one of few successful examples of converting and repurposing the huge Soviet factories and industrial complexes for the 21^st century—many have been abandoned or are barely ticking over on 'what is left.' One solution is to convert them into industrial parks. Kaluga has twelve such industrial parks. In Chelyabinsk, the Stankomash factory, which during Soviet times produced frames for agricultural machines and machine components, is now a cluster of more than 10 companies focused on machine building. When Russia adopts modern manufacturing and the logic of clusters, how does its performance fare with global best practices? Volkswagen's Kaluga plant managed to clone the group's conveyor system, and with modern automatization systems productivity levels are the same as in Germany. Yet there are fundamental challenges for Russia's future in manufacturing.
On the one hand there are American firms with their ultra-efficiency and smart manufacturing technologies—fully automatized factories such as Tesla's and Flex are exemplars. On the other there are the Chinese, with massive economies of scales, and still competitive labor costs. Russia's manufacturing could be squeezed on two flanks and crowded out by the American and Chinese models. Or, it could adopt both—the latest automatization technologies combined with the economy of scale possible in the Russia/CIS markets with its low land and energy costs.
In order to achieve global competitiveness, automatization and scale in manufacturing appear to be the only options. Yet here, politics enters the scene and politicians want a happy electorate. For many government officials and state companies the main KPI for factories is the number of people they employ. Will this ever change? Yes, because competitive pressure gets higher every month. Jack Ma, the founder of China's Alibaba e-commerce giant has already done it: "Do you know how long it took for a Russian girl to receive her products from China after she placed her order? Two years ago, it was four months. Last year it was done within one week. We crashed Russia's whole logistics system".

Assuming politicians give the green light for the closing of inefficient sites, what will happen to Russian workers once their factory jobs are gone? Like employees in production elsewhere, they will need to be re-trained. Blue collar workers will need to become designers and programmers of robots. Pundits around the world ask if this is possible, but Russians can definitely make it work. They are talented and creative, and do take the initiative. When I asked my VKontakte network (Russia's Facebook equivalent, where I have approximately 300 contacts) for a comprehensive design solution proposal for my next book, I got more than 20 responses on the first day. Russians of all social classes have shown that they are capable of re-inventing themselves. In the 1990's I witnessed the transition from manual labor to computer numerical control (CNC) machine tools, in metal cutting. The workers that stayed on learned the new skills by themselves, without neither the state nor the firm providing any schooling. The mindset switch was immense—now we must do it again.

When heading a large manufacturing operation, I allowed every worker in my factory to come to my office in designated office hours to talk about any problem. The underlying philosophy was: "Upgrade yourselves and be ready to be part of the management team. You are the main source of your personal and for the company's development." In Russia, if a message of self-responsibility is genuine and associated with incentives, both positive (higher salaries) and negative (the alternative is joblessness), it usually works.

There is a final and harder challenge ahead of us. We will surely master cutting-edge manufacturing technologies and fast prototyping. But new technologies and good management are not enough. Moscow is said to be Russia's logistical bottleneck and it is the hub through which most goods and talents are moved across the country. In my opinion, the main bottleneck for economic development in Russia is the very low development of managers' soft skills.

To manage people in Russia, we have traditionally relied on vertical authoritarian power. Military style managers who demand respect (and who are not shy about making full use of Russia's rich vocabulary of swearwords) are effective in traditional manufacturing contexts and in construction projects. When building a factory, the hard top-down management style does work. However, when it comes to the design of new machines, R&D or innovation projects, military management fails. One cannot elicit original thinking with hard power. Our focus must be the development of soft skills, such as team work, cultural intelligence, leadership and—yes!—enthusiasm.

This article was published in the book "The Life of Russian Business: (Re)cognizing, (Re)activating and (Re)configuring Institutions"

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