New York Times, By JOHN TAGLIABUE
SEVLIEVO, Bulgaria — Much like a Martian spacecraft, a huge new factory that makes porcelain bathroom fixtures is a startling sight on the farmland outside this worn-down city of 25,000 in a remote corner of the Balkans.
Downtown, an old factory has been refurbished with the latest machines to make chromium-plated brass faucets and other plumbing fixtures.
In a village a half-hour drive across pastureland, a third factory — spanking new, low-slung and painted blue and white — turns out faucets, door handles and knobs.
All this is a result of the investment of more than $100 million by the American Standard Companies, the conglomerate based in Piscataway, N.J., that makes air-conditioners and auto parts as well as bathroom fixtures.
The business here has made Bulgaria — a country of slightly more than eight million people that is not often mistaken for an economic powerhouse — a leading supplier of bathroom fixtures to much of Europe and the Middle East, with brands like Ideal Standard and Jade.
Such investments are providing the seeds for improvement around the country, which got a fitful start in its shift to an open market economy and is still well behind most other former Soviet bloc countries, like Poland and Hungary.
But in addition to ranking among the largest foreign investments in Bulgaria, the American Standard presence is one of the few to take development into areas far from the center of government in the capital, Sofia, or the trade and tourism center in Varna, Bulgaria's Black Sea port.
It has certainly been a boon for this struggling region, providing employment as well as galvanizing efforts to transform the local economy. Jobs at the plants are so plentiful that workers have to be bussed in by the company from towns as far as 35 miles away, a significant journey for the average Bulgarian.
For American Standard, the factories also represent the company's longest step into the formerly Communist and now rapidly growing Eastern Europe.
`It is definitely among the very successful foreign investments in Bulgaria,` said Jean-Marc Peterschmitt, an economist based in Bulgaria for the European Bank for Reconstruction and Development.
Of course, experts say, operating in the Balkans poses many challenges and risks. American Standard must still rely heavily on Western suppliers, for lack of competitive local businesses. And there have been hitches because of the Balkan region's unstable politics.
When war erupted in nearby Kosovo in 1999, disrupting highways through Serbia that American Standard uses to deliver products to Western Europe, alternative routes through Romania and Greece added days to delivery times and increased transportation costs. And the recent fighting in neighboring Macedonia has done little to enhance investment in the region.
Still, the investment has given the company a pool of skilled and inexpensive labour reasonably close to crucial markets in Western Europe and the Middle East, and increasingly elsewhere in Eastern Europe.
The success in Bulgaria is in part attributable to the fact that American Standard bought in gradually, Mr. Peterschmitt said, beginning in 1992 with a joint venture in Sevlievo.
The venture involved American Standard's German unit, Ideal Standard, and the original downtown company — called Vidima, for a local river — that had been making bathroom faucets and valves since the 1930's. Nationalized by the Communists after World War II, the shabby Vidima factory was seized after the collapse of Communism in 1989 by a group of young managers, who cast about for investors. They were able to interest American Standard, whose products and managers they knew from trade fairs.
The Vidima plant, which had several dozen workers right after the war, had expanded to about 1,000 employees producing $9 million in revenue by 1992.
Five years later, American Standard had taken full control through several increases in investments, part of the millions it has sunk over the years into refurbishing the old Vidima factory and building the two new ones, the second of which opened in May. The business now provides employment directly for about 3,350 Bulgarians and indirectly for maybe five times that many people, including truck drivers and construction workers. Revenue this year is expected to total $63 million, from a much expanded product line.
"I wanted this job — it's more in line with what I studied," said Ivailo Kanev, 30, who buffs and polishes brass faucet parts.
Mr. Kanev had gone to a local technical school, but then found work only at a textile factory rinsing newly woven fabric. With overtime, he now earns the equivalent of $175 to $220 a month, compared with $65 to $90 at the textile factory and the country's average wage of $100. This, he said, allows him to provide nicer clothes for his wife and their young daughter, and even take an occasional holiday away from Sevlievo.
Such wages may be a windfall for Mr. Kanev, but they are still a bargain to American Standard. Labour costs here are only about one-tenth of those at the company's factories in Western Europe.
American Standard says it is not just the inexpensive labour that makes Bulgaria attractive. "Geographically it is a good place to be, and the quality of what they make is world class," said Frederic M. Poses, the company's chief executive. "You have people who want to work, who want to be better, who care about their work."
Roughly one-fourth of American Standard's annual revenue of $7.6 billion, or $1.8 billion, comes from bathroom fixtures, and sales in Europe make up about half that amount. The Bulgarian factories are expected to account for around 7 percent of the company's European sales this year.
The return on investment has been rapid and substantial. The $43 million porcelain factory, which opened in 1997, paid itself off in four years, said Vasil Kanev (no relation to Ivailo Kanev), one of the young post- Communist era managers who was recently named chief executive of Eastern Europe operations.
American Standard's business here is very much in line with the policies of the government that took office in 1997 pledging to move the country toward a Western-style market economy. Those policies are expected to be continued by the cabinet that will be formed when the newly elected Parliament assembles next week.
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