Narva, 2009
Oleg Klushin:
I worked in Kreenholm for more than 40 years. I started in 1960 and worked until 2002. I went from being an ordinary worker to a factory director. I retired in 2002.
When did you become a director?
I worked as a director from 1980 to 1985. It wasn’t easy, of course, but I must say it was quite interesting. During that period Kreenholm was a very powerful company. It was cost-effective and made a good profit. Unfortunately that’s now all in the past. Technically, there are two major reasons for the way that Kreenholm has evolved. First, in Soviet times there was a closed market and all Kreenholm production was intended for the Soviet Union. It was an enormous market, consuming everything we produced and demanding more and more. Since the quality was good, Kreenholm was in business. The market was lost immediately with the collapse of the Soviet Union. Actually, this has happened to Kreenholm twice. The first time it happened was after the Russian Revolution – previously Kreenholm had targeted the market in Russia, which vanished after the revolution – so history repeated itself. Needless to say, Kreenholm has had to learn to operate and to survive on the competitive international market.
Our money was kept in the Soviet Banks, which all disappeared along with the Union, so when the Soviet Union ended we lost it all. We had to start everything practically from scratch. It was a difficult time, but we slowly began to get back to our feet and reoriented ourselves towards the European and US markets. There was a shortage of money and unfortunately Kreenholm was unable to secure credit from Estonian banks. Without substantial financial aid the factory would have been in a very difficult situation, but in 1995 it was privatised by the Swedish company Borås Wäfveri. Of course the new owners began to introduce new policies. But thanks to the restoration of finances, Kreenholm’s excellent potential and the existence of interested markets, the factory was able to quickly increase its output and reached one billion Estonian kroons per annum by 1998-1999.
Unfortunately, as I have already mentioned, the new owners brought their own views and their own policies; and their policy was that Kreenholm should sell itself as a brand. In my opinion that was a devastating decision for Kreenholm. A manufacturing complex as enormous as that of Kreenholm, with its eight big factories, requires a huge market for its product. It turned out impossible for our brand to compete with China and India for good markets while remaining cost effective. Consequently, Kreenholm’s big customers left us for China, India and Pakistan, and we were left with smaller companies who were prepared to pay a slightly higher price but could not buy the large quantities that Kreenholm was capable of producing. Sales went down and expenses went up, triggering a price rise, which in turn further decreased the number of customers. This has lead to Kreenholm, once a huge manufacturer, as you see it now. You just cannot make a boutique out of a big factory. A different scale calls for a different philosophy and different policies. The chosen path has proved ineffective and has left Kreenholm with only finishing and sewing production.
So how did you and your work colleagues react?
Well, you can clearly see a Russian mentality in this. The Russian people have become used to all kinds of hardship and misfortune, and they have learned to live with it and to tolerate it. But it is, of course, really painful to witness your company dying right before your eyes: not only for me, but I’m sure it is for many other people I know too. You might regard this as grouching from a grumpy old man, but I really consider the management of Kreenholm incompetent. Aside from everything else, they have committed so many follies that quickened the decline of the factory.
But eight or ten years ago there was still hope?
Yes, there was a chance. Even despite the severe competition Kreenholm could have been a viable enterprise, but the sum of all those mistakes was that it was unable to handle such competition.
What were those mistakes exactly?
There was a whole bunch of them. I think the main one was the lack of any decent economic management. Kreenholm was a vertically managed company with tough centralised control. After privatisation it was decided that each individual factory would become a joint-stock company; so, they decided to turn Kreenholm into conglomerate of stock companies. But they soon began to have second thoughts as there were now eight control centres instead of one, each spending money as it deemed necessary. So seven years after privatisation, Kreenholm became vertical again, but by that time there had already been significant losses. First of all, money matters had been handled by separate managers who were good technologists but poor economists.
One of the Soviet Union’s peculiarities was that the centralised economy did not motivate people to show any economic initiative or to make an economic analysis of productivity. There was data to be reported, but only the director was responsible for ensuring that people were working efficiently. It was evident that many people were quite unprepared when they each had to become accountable for their own work; and of course this has lead to great amount of waste. The planned modernisation of Kreenholm inflicted serious damage. A huge sum of money was made available on credit, but there was no substantial analysis of the necessity, efficiency and risk of the venture. Hundreds of millions of kroons were completely wasted. Interest charges increased repayment expenses and consequently raised the total cost of the product. Again Kreenholm’s competitiveness began to fall.
There were many other mistakes too, but still the main mistake was that no one handled the economics seriously. When looking at the administration of the budget for each individual factory, the main consideration would have been the cost-effectiveness of the factory, which depended on many things. For example, when agreeing the price of yarn production would be considered efficient if the weavers had managed to get a suitable price from the yarn suppliers. But the expenses themselves were never taken into account and as time went by those expenses grew and increased the prime cost of production. When I retired in 2002 Kreenholm was still making a small profit, but subsequently it has been operating at a loss which has been growing bigger and bigger.
Who was in charge after privatisation?
The first, immediately after privatisation, was Meelis Virkebau. He was in charge until 2002. I retired that summer and he left at the end of the year after a quarrel with the owners. After him there came a number of totally incompetent Swedish directors, people who had previously had absolutely nothing to do with textile industry. In my opinion, the kind of philosophy whereby it is thought unnecessary for executives to have technical knowledge of the working process is a mistake. Of course the management of financial matters is an important aspect of the job, but it is far from being the most important! Most important is that you know what you are doing, and for that, you also need to know the technology very well, but this wasn’t the case.
I heard a rumour that the new management actually wanted Kreenholm to sink!
A lot of people have that opinion. To repeatedly make all those mistakes again and again one has to be either very stupid or to deliberately intend the death of the enterprise. I don’t know which is better.
And what about Igor Poleschuk? I heard he had brought some hope.
Quite right. When he became director [2009] he called me and one of my colleagues, also retired, to help him understand why Kreenholm was operating at a loss. We worked together for about half a year, but unfortunately Poleschuk was soon dismissed. Probably it was partly our fault, because while working as consultants we had always insisted that Kreenholm had to handle its own sales. The problem is that nowadays the Kreenholm factory is simply a production facility, while the sales office is located in Sweden. There was absolutely no essential link between the manufacturer and the seller. The latter is only interested in selling the textiles at the highest possible price, while the quantity of product sold at that price is of no interest to them. As a consequence the 1.2 billion kroons of textiles produced in 1999 has reduced to 400 million kroons today.
Oleg Klushin and Ekaterina Moskalenko
Are there any archives of Kreenholm?
Unfortunately – again I find myself saying ‘unfortunately’ – the new owners of Kreenholm acted much like the Bolsheviks did. Everything from before their arrival was considered unnecessary, so all of those irreplaceable archived documents – all the papers – ended up in the rubbish heap.
When did this happen?
During the last five years, mostly.
Ekaterina Moskalenko:
And it’s not the only papers that are gone; it’s the traditions as well too – all the traditions of living with Kreenholm. Kreenholm was like home; whole families worked there. You should have seen how we honoured our veterans, how we monitored the working process, and not only to follow the schedule but also to master new technologies, to improve our skills and so on. There is nothing left of that now. Everything has gone and we can only mourn for the loss. There’s no more unity – the unity that was cherished and cultivated and that made Kreenholm one big friendly family. Now there is a proposal to create a museum of Kreenholm. There is an archive but it only contains personnel files. There was also a magnificent library that had the rarest books and manuals. It was truly a unique compilation of technical literature. I’m really not sure whether it still exists.
Oleg Klushin:
As you see, a lot is now lost. I repeat, it really reminds me of the Bolsheviks – “We are not concerned with anything that went before us!”
Do you think that the factory will be closed finally?
Yes, I’m afraid so. With a management like the one leading Kreenholm at the moment I really don’t see any future for the factory. It will hold out for a while, but considering that it is operating at a loss it cannot go on forever. I’m surprised the owners have the money to cover those losses. I have almost no faith at all. Kreenholm has been put in such a condition that I wouldn’t bet on it surviving more than one or two years.
How does it feel to see the factory now? Do you live in Narva?
Ah… Don’t ask! Don’t even ask! Well, of course the pain has persisted but it is not as sharp anymore. You know, there have been different eras in the history of Kreenholm. In 1857 when the construction began and during the first years of its operation, the workers were treated like they were anywhere else – England, France, Germany – like draught animals. But in 1872 there was a strike because the director, Kolbe, made people work despite the cholera epidemic and despite the fact that working in crowded places had only served to spread the disease and it had even taken several lives. Although he was a major stockholder Kolbe was dismissed and from then on policies began to change. New hospitals, schools, kindergartens and apartments were built for workers and their families. Policies became more socially-oriented. It was quite a progressive attitude for those times, and I think that the “family spirit” was born at that time. Before the arrival of the Soviet army in Estonia, and after the first world war, during the first Estonian Republic, that spirit was sustained such that all workers felt themselves to be part of the family; that spirit was totally destroyed. Now it is gone. Of course a lot of people are gone too: not much remains of the huge collective that was once at Kreenholm – about 400 from 11000.
Were there any women operating machines in Kreenholm?
Sure, there were women on the machines and there were women in charge of the workshops. There wasn’t any sexual discrimination whatsoever.
What has become of the old factory machines now?
Some were sold, some were just thrown out. I’m no longer in communication with the people so much, so I don’t know much about it.
Were the machines too old?
I wouldn’t say that. Of course there were some that might be considered old, but… in any case they didn’t allow the factory to be competitive.
How do young people regard life in Narva? Do they want to live here?
No, they don’t have such a perspective. Especially now, during the crisis, they are looking for opportunities to leave.
I’m not anti-globalisation, but in my opinion globalisation is suicidal for both Europe and the US because today it is not only the production that is going East but the new technology too. The race for every last cent will one day lead to disaster. Given the mentality of the Muslim countries and the large number of radical movements – the foundation of international terrorism – nothing good for Europe can come of supplying them with the latest technology. I see this as a fatal flaw in the policy of a totally free market.
You said earlier that you went from being an ordinary worker to factory director. How did that happen?
Well, I didn’t do anything special. I just tried to do my work as best I could.
And what was your first job?
My first job was as a machinist. I assembled the machinery. Although I had a university degree, my father, who was an assistant chief engineer at Kreenholm, told me that to become a good executive it is necessary to experience being an ordinary worker and working with other ordinary workers. I worked as a machinist for about a year and I must say that it was a really good experience. Next I became a foreman and slowly worked my way up.