BUSINESS WATCH

The return of the native capitalist

Tom Bata wants to help Czechoslovakia modernize and rebuild its industrial base, and is willing to risk millions to do so

PETER C. NEWMAN March 12 1990
BUSINESS WATCH

The return of the native capitalist

Tom Bata wants to help Czechoslovakia modernize and rebuild its industrial base, and is willing to risk millions to do so

PETER C. NEWMAN March 12 1990

The return of the native capitalist

BUSINESS WATCH

Tom Bata wants to help Czechoslovakia modernize and rebuild its industrial base, and is willing to risk millions to do so

PETER C. NEWMAN

No Canadian businessman is more intensely involved in the turmoil sweeping Eastern Europe than Tom Bata, the 75-year-old Toronto-

based chairman and chief proprietor of the $3billion enterprise that manufactures 300 million pairs of shoes a year and had its start in the small Moravian town of Zlin before the Second World War. He has become such a potent symbol of Czechoslovakia’s economic rehabilitation process that, if he agrees to spend the millions of dollars required to modernize his factory, it will be an important signal for Western investors to follow into the other liberated onetime Soviet satellites.

While Czechoslovakian government officials are trying to come up with an acceptable formula for privatizing the huge Bata manufacturing complex, the issue is complicated by the fact that Bata insists he really can’t be expected to buy back something he already owns. “I would like to see some form of restitution for the Communists’ original takeover,” he told me in a recent interview, “but we are more interested in putting new work into the country and making a contribution, than getting a chunk of money. Whatever happens, we want to help develop Czechoslovakia’s industrial activity rather than trying to milk the place.” That altruistic approach from one of Canada’s toughest international businessmen no doubt flows from the welcome Bata received when he returned to Prague last December for the first time since he left on March 13, 1939, just two days before Czechoslovakia was invaded by Germany. “It was the culmination of my life,” he recalls. “Nothing could be as exciting as standing between the hoofs of the statue of St. Wenceslas in the centre of Prague, with a microphone in my hand and multitudes of people in front of me cheering every word I said. Part of that salute would have been for the folk memory of the good job our company did the last time the country was free. But I also kept the Bata name alive by doing broadcasts

for the Americans over Radio Free Europe and

sponsoring televised soccer matches seen behind what was then the Iron Curtain.”

He met President Václav Havel, and the two men hit it off immediately. “He was wearing corduroy pants and some sort of jacket with an open-neck shirt,” Bata remembers, “and when he lit up a cigarette, he told me: ‘Gee, if this was your father’s business, he’d fire me. But I’m hooked on cigarettes for the moment.’ ” Havel advised Bata to go back to Zlin, where he would be in for a pleasant surprise. The company town was such a monument to capitalism that Czechoslovakia’s first Communist president, Element Gottwald, renamed it Gottwaldov after himself. One of Havel’s first political decisions was to restore the former name, and, by the time Bata arrived, the transformation had been completed—even if some of the paint on the new sign was still wet.

“The original factory buildings were there just as I remembered them half a century ago,” says Bata, “but they seemed old and dusty. My first visit was to the grave of my father, Tomás, and I was rather touched by the fact that there were so few people in the cemetery, only the old men who tended the flowers. Everyone seemed very considerate of my emotions.

“We were welcomed into the factory by the

company band, which used to be smartly turned out, with all the instruments more brightly polished, but they played well and chose the right kind of tunes. We then took the famous elevator to the various floors of the administration building and had a good look around.”

That 15-storey structure, once the highest reinforced concrete office tower in Europe, had an elevator equipped by Bata’s father as a floating office so that he wouldn’t have to waste time between floors. It held his filing system and communications equipment so that, whenever he wanted to confer with groups of executives on any of the floors, he would just push a button and appear in their midst.

Bata found some of the equipment in fairly good shape, though not up to the standards of automation he uses in most of his shoemaking plants in less developed countries. “But a lot of the machinery,” he reports, “is more than 50 years old and definitely needs to be replaced.”

It’s difficult to estimate how deeply the workforce would have to be cut to accommodate modern production techniques. At the moment, the entire enterprise employs about 85,000 people and turns out 100 million pairs of shoes per year under the Svit label. Most of them are shipped to the U.S.S.R. Bata has a task force at Zlin at the moment and he is waiting for its detailed technical report, but thinks that at least 10,000 workers would be declared redundant in a modernized factory. “We’re interested in finding a way of operating the show and participating or getting the factory back, but the Czechoslovakian government is still groping for an appropriate policy to bring it about.”

Tom Bata’s wife, Sonja, who is a full partner in the enterprise, points out that one of the big problems is establishing a true price for merchandise, because for 40 years there was a state monopoly. “In Prague,” she told me, “there are 90 shoe stores serving 1.5 million people, which clearly isn’t enough. In calculating retail prices, they have not taken into account store rentals, amortization of equipment or any maintenance costs—so you have a totally unrealistic price structure. There are also subsidies and taxes—a 30-per-cent allowance for children’s shoes and a 47.3-per-cent sales tax on adult leather shoes.” The real problem is that there is little connection between production and distribution departments as well as the inability of existing production lines to cater to customers’ preferences, with too many standard lines and little attempt at original styling.

For the moment, the Batas plan to reopen at least two Prague shoe stores and test the market, partly with imported merchandise. When the company’s task force report becomes available and the Czechoslovakian government formulates its privatization laws, there is little doubt that the Batas will reclaim their factory and boost the quality and quantity of production into one of their major units.

Knowing the Bata operating methods, it will eventually be a moneymaking proposition. But bottom lines don’t count quite as much once you’ve been standing between the hoofs of a saint on horseback.