Honeywell Sees Honeymoon End
BULGARIA: HIGH-TECH INDUSTRY
FOR dozens of United States companies, the changes in Eastern Europe have opened the door to new business opportunities. But for Honeywell Inc. of Minneapolis, a leading producer of industrial control systems, the changes have disrupted a thriving business. ``It's been good news and bad news for us,'' says Alfredo Maselli, international vice president of Honeywell.
Since 1983, Honeywell has been a partner in a successful joint venture in Bulgaria known as Systematics. It installs and services process control systems for the chemical industry. The Bulgarian partner has been the Ministry of Chemical Industries, representing several semiautonomous firms under its jurisdiction. With strong backing from the ministry, which made most investment decisions, Honeywell's position was very secure. The company managed to sell about 30 industrial control systems since the joint venture began.
``We knew which doors to knock on,'' says Mr. Maselli, ``and we could argue that Systematics was a Bulgarian company and should get the contract.'' Moreover, as one of only a handful of joint ventures involving a Western firm, government authorities took a special interest in Systematics because of its symbolic value. ``I had access to ministers,'' Maselli says.
But economic reforms now underway have eroded Honeywell's privileged position. ``We have lost some of the power we had through the centralized economy,'' Maselli says.
Since 1987, the Bulgarian government has been experimenting with decentralization, granting state firms more autonomy, and introducing commercial banking and other measures that point in the direction of a free economy. While the reforms have not gone as far as those introduced in Poland and Hungary, the Stalinist regime that ruled Bulgaria for 35 years was replaced last year by a government pledged to accelerate the pace.
For Systematics, this has meant the removal of the Ministry of Chemicals from the partnership. Honeywell's new partners come from the ranks of autonomous chemical firms. With decisions that used to be made in the capital city of Sofia now being made at the factory level, Honeywell has already felt the changes. ``People suddenly have discovered they have other options besides Honeywell,'' Maselli says. ``Indications are that the competition will get stiffer.''
Thus far, decentralization has not cost Honeywell any business, but Maselli says the company has had to work hard to maintain its dominant market share. ``We got a little spoiled. Now we're in a more natural competitive environment,'' he says.
One factor working in Honeywell's favor is that Systematics has trained several thousand Bulgarian engineers over the last seven years, which provides an enormous marketing advantage since many of those engineers are now in positions to influence investment decisions.
Moreover, Systematics helps Bulgaria save vital foreign exchange, a critical issue for a small country (only 9 million people) that is hobbled by a $10 billion foreign debt. The savings arise because Systematics uses Bulgarian engineers instead of foreign technicians to assemble and maintain the imported industrial control systems. Honeywell's competitors do not currently offer such a service.
Meanwhile, the success of Systematics has opened new doors for Honeywell in the Soviet Union, where the company is now operating a similar joint venture with the Soviet Ministry of Mineral Fertilizer Production. An official of Systematics was a consultant to the Soviet ministry, and introduced Soviet officials to Honeywell. ``Our work in Bulgaria helped convince them that they were choosing the right partner,'' Maselli says.
Working through Systematics, Honeywell currently supplies sensors to a Bulgarian-Soviet joint venture that manufactures automobile ignition systems. The ignitions are then exported to Soviet auto factories, which also utilize Honeywell technology.