Automotive History: An Unlikely Story – How Soviet Ladas Were Almost Sold In The United States

In 1980, much of the world worried that the United States and Soviet Union were hurtling towards World War III.  Tensions between the superpowers hadn’t been as strained in over a decade, and the soothing years of détente seemed like a distant memory.  However, in that very year, a Soviet-built car came within a bear’s whisker of being marketed in the US.  The unlikely saga of trying to sell Ladas in the United States spanned eight years and included many of the regulatory and logistical pitfalls common in attempts to export cars to another country, plus an extra dose of geopolitical crises and rancorous politics.

There are no certainties when dealing with international trade between arch enemies.  Cultural differences, delicate diplomacy, politics, global economics and other complex issues all converge unpredictably in such situations – and the effort to bring Ladas to the US featured all of these.  Sometimes they worked to the deal’s benefit; often times not.  But the fact that this deal almost succeeded is quite remarkable, and is a testament to the unique business savvy of one man: an American entrepreneur named Ara Oztemel.

Oztemel, as a college student, is on the left. His saxophone-playing skills will come in handy later.

Ara Oztemel is hardly a household name, yet he controlled parts of US-Soviet trade for decades.  Most of this trade occurred in raw materials and went unnoticed by the public, though that doesn’t make Oztemel’s achievements less fascinating.  Born in 1926 to a well-to-do Armenian family in Istanbul, Turkey, Oztemel came to the United States as an 18-year-old, eventually enrolling at Boston’s Northeastern University to study engineering.  During his college years, Oztemel turned to entrepreneurship to help make ends meet – starting an electroplating business that he sold several years later for the hefty sum of $83,000.  Following a few years of working for large corporations, Oztemel sought to jump a few rungs in the supply chain and enter the murky business of importing chrome ore.

Stainless steel became popular for everything from train bodies to razors to kitchen goods… and it all depended on chromite.

Chrome ore, or chromite, is a ubiquitous raw material in industrial economies (an ingredient in stainless steel, among other products), but one for which the United States has no domestic source.  With US chromite use having soared during and after World War II, efforts to obtain stable supplies of the mineral took on a sense of urgency.

Oztemel initially named his company Greg-Gary International, after two of his children, and in the early 1950s concentrated on importing South African chrome ore.  Over time, his geography expanded to Turkey… and then to the Soviet Union.  The USSR contained massive chromite deposits, however the once-significant Soviet exports of the mineral hadn’t yet recovered after the war, so Oztemel landed at the right place at the right time.  The Soviets were hungry for western currency, and chromite was a logical way to get it.  Soviet trade quickly became the bulk of Oztemel’s business, and in 1965 he renamed his company the Satra Corporation (Satra being a contraction for Soviet American TRAding).

1973 Red Square Moscow

Red Square, 1973. Plenty of GAZ 24 Volga sedans here.

During the Cold War, Soviet-Western trade was no simple matter.  Due to a baffling amount of regulations, distrust, bureaucracy and currency concerns, such trade often took place by barter, product paybacks… or by financial complexities like “switch dealing” or using “clearing dollars.”  Oztemel mastered all of these.  Furthermore, Soviet authorities preferred dealing with decision-makers, which was why negotiations with large western corporations often failed when the westerners had to consistently check with their superiors before proceeding.  Oztemel was his own boss, and didn’t have that problem.  Consequently, he and a handful of others had US-Soviet trade all to themselves.

Volga Hydrofoil Ad

Though its core products were raw industrial materials, Oztemel’s Satra Corporation would trade in anything for which there was a reasonable market, and in 1966 the firm added a new product to its repertoire – Soviet-built hydrofoil watercraft.  This wasn’t completely random, as the Soviets were quite proud of their hydrofoils.  In fact, six years later when Richard Nixon presented Leonid Brezhnev with a Cadillac Eldorado at the leaders’ Moscow Summit, Brezhnev reciprocated with a hydrofoil.  Despite that pride, Satra’s efforts to sell hydrofoils in the US fizzled, but the company gained valuable experience in marketing Soviet-made consumer products.

1967 War and Peace Poster

At the same time as Oztemel expanded his business into durable goods, he also expanded into arts and culture.  Satra took a leading role in introducing Americans to Soviet film and art.  The company bought English-market distribution rights to War and Peace and Anna Karenina, sponsored Russian art exhibits and also traded in Russian art.  Such cultural exchanges helped Oztemel curry favor with Soviet officials, which in turn benefited his core business.  Additionally, unlike many western businessmen, who assumed their Soviet counterparts were taciturn, humorless ideologues, Oztemel appreciated not only their business acumen, but also their interest in culture… and fun.

Intourist Hotel Moscow

Moscow’s Intourist Hotel

Yes, fun.  Oztemel often threw parties for his Soviet colleagues, both in London (where he spent considerable time) and Moscow.  Once, he brought a New York jazz band (including harmonicist Toots Thielemans and double bassist Milt Hinton) to entertain the trading elite at Moscow’s Intourist Hotel.  Oztemel, himself a talented saxophonist, joined in, delighting the crowd.  Most western business executives would never dream of partying with the Russians in Moscow.  This was yet another way in which Oztemel was able to endure and prosper in a very complex business environment.

Due to his ability to tread where most Americans dared not to, Oztemel was occasionally hired by US companies wishing to do business in the USSR.  This involved some high-profile projects, such as brokering a deal between Mack Trucks and the Soviet government in 1971 to supply equipment and know-how for the new Kama River (Kamaz) truck factory.  In this case, negotiations took 15 months to reach a tentative agreement, yet ultimately collapsed due to resistance from the US military.  Of course, in the mercurial world of negotiating deals between dualling superpowers, failures were inevitable, but the Kamaz project showed that Satra – no longer just a dealer of chrome ore – was willing to spend considerable time and resources in pursuing highly challenging projects.  This wouldn’t be the last time.

Moscow 1973

Moscow, 1973.

Selling consumer goods abroad became a priority in Soviet economic planning because the USSR government desperately wanted western currency, in order to (among other things) pay for corporate expertise in establishing new manufacturing facilities.  With Soviet rubles being valueless internationally, the Kremlin eyed the foreign sale of Soviet-made products as the best way to obtain hard currency.  Vehicles formed a crucial part of this trade.  The USSR’s early-1970s 5-year Plan called to double the nation’s auto production, largely through exports.

US Commerce Secretary Maurice Stans meets Soviet Premier Alexei Kosygin in Moscow.

Soviet trade with western Europe was percolating by 1970, but the United States – with its vast consumer market – held unignorable appeal.  And while the truck plant deal failed, the future held promise for US-Soviet trade.  President Nixon’s détente campaign, which sought to normalize east-west relations and liberalize trade, promoted “an open exchange of goods and people.”  In fact, shortly after the Mack deal fell through, US Commerce Secretary Maurice Stans met with Soviet Premier Alexei Kosygin to discuss improving US-Soviet trade.  It was probably clear at the time that whatever form such trade would take, Ara Oztemel would be at the center of it.

Moskvich 412 Saloon brochure UK

At the time of the Stans/Kosygin meeting, Satra Corporation controlled half of all US chrome ore imports, had 300 employees worldwide, and counted some of America’s most notable corporations (for example, IBM and US Steel) as its clients.

Importantly, at around the same time, Ara Oztemel had begun dabbling in Soviet auto exports – taking control of the UK’s small Moskvich distribution network in 1969.

Togliatti Factory

Both Oztemel and the Soviet hierarchy saw export potential in a new car model, one for which the Soviet Union partnered with Fiat to build an enormous automobile factory in Stavropol, on the shores of the Volga River.  The city itself was quickly renamed Togliatti (after Italy’s former communist party leader), and the 22.5-million sq. ft. factory with 90 miles of assembly lines started producing cars in April 1970.  Within just a few years, upwards of 500,000 cars were produced there.

Zhiguli at Chemistry '70 International Exhibition Moscow

Zhiguli shown to the public at Moscow’s Chemistry ’70 International Exhibition.

Officially named VAZ (Russian acronym for Volga Automobile Factory), the car’s various models were commonly known in its native land as the Zhiguli.  The original VAZ 2101 above was succeeded by a half-dozen later models, all sharing the same basic configuration and remaining in production for over forty years.

1967 Fiat 124 Ad

The Zhiguli bore a strong resemblance to Fiat’s 124 on which it was based, but the cars were not identical twins.  The Soviet car’s body was made of thicker, 16-gauge (though hot-rolled) steel, its suspension was raised and featured some heavier components, and while the 1500cc engine copied Fiat’s, it used SOHC heads in place of pushrods.  Overall, a Zhiguli weighed 160 lbs. more than an equivalent Fiat.

Lada Ads UK and West Germany

VAZ set its sights on exporting this new car (called the Lada in most export markets), and Oztemel obtained distribution rights for three countries: the UK, West Germany… and the United States.  At first, plans moved quickly; British and German sales started in 1973/4, but the US would be a tougher nut to crack.

There were ample reasons, however, for Oztemel to try and pull off this seemingly impossible venture.  For one, promoting the sale of Soviet products in western economies would likely boost his own status with Soviet authorities, especially since many other traders were dismissive of the prospects of selling Soviet goods.  For another, since the Soviets willingly sought western goods and technology in building new industrial plants, Oztemel likely concluded that a further expansion of the Russian auto industry would bring even more such deals, which naturally would favor his own company.

Belarus Tractor ad 1975

Prior to marketing a car in the United States, Oztemel imported another Soviet vehicle – a tractor.  Satra began importing Minsk-built Belarus tractors to Canada in 1973, expanding to the United States a year later.  These 4wd tractors sold for about half the price of an equivalent American tractor.  But they were no-frills apparatuses, marketed as rugged machines built to withstand harsh Soviet conditions.  The typical Belarus buyer was an independent farmer prioritizing value, and willing to think outside of the mainstream by owning a new brand.  Satra hoped that a similar marketing formula would eventually lead to US success with Ladas.  Belarus tractors proved to be somewhat successful; several thousand were imported per year, a fact that provided optimism for selling Soviet cars.

1973 Lada brochure from New York Auto Show

Satra distributed this brochure at the 1973 New York Auto Show

As an initial step leading up to automobile sales, Satra presented the Lada at the 1973 New York Auto Show.  Preceding the show, Satra held a press conference, which didn’t quite go smoothly.  First, the press event featured no cars.  Then, a Soviet official started speaking in Russian, which none of the press understood.  A translator soon took over, but it was probably better when no one understood what was being said, since the Soviet’s speech turned into a lecture on the superiority of Russia’s public transit system.  Satra’s technical director then spoke, and did only slightly better.  In explaining the difference between the Lada and Fiat’s 124, he said, awkwardly:

“For the American lady who buys color and upholstery [the Lada and Fiat] might seem identical, but technically the Lada has many improvements.”

Still, some interesting points were made.  For example, the target price was said to be $2,500 – and the marketing strategy was to highlight the car’s value, fuel efficiency and durability (reminding customers that Ladas are built to withstand harsh Soviet road and weather conditions, similarly to the Belarus tractor).

At the Auto Show itself, actual Ladas were there, and the display aroused curiosity among showgoers, maybe because it also featured young women dressed in fur bikinis.  Fortunately for Satra, there was no significant anti-Soviet activity at the show (which was very much a concern beforehand).

Satra showed not just Lada sedans and wagons, but also the UAZ 469 utility vehicle, though it appears serious consideration was only given to importing the sedan.  At the time, Satra reported that it had ten cars in the US undergoing safety and emissions tests, and planned a 1975 introduction.  Turns out 1975 was a bit optimistic.

Lada 1500 interior

Lada 1500 interior

When 1975 rolled around, there were still no US Lada showrooms.  Satra said that the process of federalizing the vehicles caused the delay, which was entirely possible since emissions standards baffled many manufacturers.  But other factors were likely at play too – such as the many complexities in US/USSR relations.

At the top of the list was the Jackson-Vanik Amendment, which Congress passed in 1974 and that withheld “most favored nation” trade status from communist countries that restricted emigration.  This was significant, since the US tariff on imported cars stood at 3% for most-favored nations, but 10% for those without such status.  It’s quite likely that Oztemel chose to delay the Lada’s introduction in hopes that pro-trade officials within the federal government would succeed in easing the Amendment’s restrictions.  If true, this turned out to be an unrealized hope, as Russia wasn’t granted normalized trade relations until 2012.

The Jackson-Vanik Amendment and its pro and con arguments reflected a larger debate in the United States regarding Soviet trade.  In the pro-trade business camp was none other than John DeLorean, who at one point had expressed interest in managing Satra’s Lada-importing efforts.  DeLorean summarized the pro-trade viewpoint by opining that “eventually this is one way we are going to achieve world peace – through international trade.”  Others called this viewpoint naive in dealing with a nation they believed to be militarily and economically hostile to US interests.  AFL-CIO president George Meany retorted, rather bluntly, that “we’re not interested in seeing American workers displaced by slave labor.”

1973 VAZ 2103

Meany used polarizing language, but the challenges of importing goods from a non-market economy were very complex.  Satra encountered yet more headwinds trying to prove that they were not running afoul of anti-dumping legislation.  The problem was that in the early 1970s, Zhigulis were sold to Soviet citizens for about $7,000 – and the projected US retail price was less than half of that.  On the surface, that seemed like the very definition of economic dumping (the act of selling a product in export markets for less than in the manufacturer’s domestic market).  Of course it was incredibly difficult to determine the true cost of Soviet-made goods because Soviet domestic prices were not based on “costs” as western nations defined the term, but rather were based on the priority given to those goods by the USSR’s central planners.  But the notion of dumping propelled adversaries to oppose Soviet trade even more, and Satra had to navigate this minefield too.

1979 Lada 2106

Meanwhile, between emissions regulations, safety requirements, and navigating countless political hurdles, the Lada’s US introduction kept getting pushed back.  In 1975, Satra promised US Ladas by ’76.  By 1976, that date was pushed back two more years, but planning continued.  During this period, the firm set up the beginnings of a US distribution network, which included plans to build a $2.1 million assembly plant near the Port of Savannah, in Georgia, in order to install equipment specifically for the US market.

At first glance, Savannah may seem like an odd location, especially since Satra expected most early sales to be in the Northeast.  However, it held a few advantages.  For one, Northeastern longshoremen were known to occasionally refuse to offload vessels carrying goods from communist countries – Southern ports were less prone to this disruption.  Additionally, labor costs were much more reasonable in Savannah as opposed to New York.  But perhaps most importantly, Georgia was President Carter’s home state, and a facility offering 350 assembly jobs during the moribund late 1970s was no small matter.

By late 1979, Satra still considered US Ladas to be about a year away.  Though four years of delays may appear to represent hesitation or disorganization, all indications point to Oztemel and his company still being serious about importing them.  Satra went on a hiring spree, and even leased the entire 31st floor of New York’s Celenese Building at the Rockefeller Center as its headquarters.  Plans coalesced regarding timeframes for constructing the Savannah plant and establishing a distribution network, and it seemed that a solution was finally at hand for meeting EPA pollution standards.  Meanwhile, Oztemel noted that he hoped to sell 5,000 Ladas during the first year, building up to 50,000-60,000 annual sales within five years.

But then the Soviet Union invaded Afghanistan.

After the Red Army crossed the Afghan frontier in December 1979, years of détente between the superpowers evaporated immediately.  At first, Oztemel – a veteran of countless US/Soviet crises – was publicly unconcerned, saying “We have experienced the ups and downs quite a few times.”  This time, however, was different.  The Lada Plan’s defeat would come by the end of 1980, ultimately done in by the most prosaic of enemies – politics.

US Senators Birch Bayh (l) and Thomas Eagleton (r)

1980 was a US presidential election year, and it seemed as if every politician wanted to appear to be tough on the Russians.  This was particularly true for Democratic congressmen trying to distance themselves from the increasingly unpopular President Carter.  One such politician was Indiana Senator Birch Bayh, who was facing a tough re-election bid.  Representing an auto-producing state, Bayh found the soon-to-be-imported Lada to be an easy target.  In May 1980, he introduced a Senate bill to prohibit imports of Soviet motor vehicles.  That legislation generated little support, but Bayh didn’t lose sight of his target.  Experienced politicians have many ways of getting what they want.

As a member of the Senate Appropriations Committee, Bayh held influence over various agencies’ budgets.  In September 1980, he and fellow Senator Thomas Eagleton of Missouri (another Democrat who was facing re-election) co-sponsored an amendment to the Environmental Protection Agency’s 1981 budget prohibiting the EPA from spending any funds to certify that any Soviet-made vehicle met US emissions regulations.  This crafty bit of legislation infuriated President Carter, who saw it as legislative intrusion on executive branch policymaking.  But the bill was less about policymaking than it was about senators striving for an anticommunist image in an election year.  The Appropriations Committee passed it 11-to-4.  Incidentally, Bayh lost his re-election bid; Eagleton won his.

Satra executive Carl Longley called the EPA budget amendment “politically motivated,” which of course it was.  But politics prevailed in this game.  An aide to Senator Eagleton summed up the political angle by saying that importing Ladas would be “the wrong message to tell the Russians, after Afghanistan, that our markets are theirs for the taking.”

Shortly thereafter, the Satra Corporation’s plans to import Ladas collapsed.  Satra disposed of its Savannah property without building the plant, laid off the staff it had hired to manage Lada, and moved out of its Midtown Manhattan high-rise offices in favor of an Upper East Side townhouse.  Yet the closeness with which the Satra/Lada plan came to succeeding begs the question: What would have happened if Ladas actually had been sold in the US?  The answer can’t be known, but insights can be gained by looking at our northern neighbor, where Ladas were sold during this period.

192 Lada 1500S brochure Canada

Canadian Lada sales began in late 1978, capping a six-year effort by importer Peter Dennis, who had a background working for several European car companies.  Dennis’s operations and marketing plan largely paralleled what Satra had planned in the US – a car-preparation facility was established in Ontario, initial sales were limited to a handful of large cities (Toronto, Ottawa and Montreal), and the cars were marketed as economical and durable no-nonsense vehicles.  Lada’s initial price of $3,425 made it Canada’s cheapest car.  Initial results were encouraging: Sales were brisk, and within two years, Ladas were sold through 43 dealers and were back-ordered in many parts of the country.

But sales rapidly plummeted due to a stagnant product and growing ill feelings toward the Soviet Union resulting from both the Afghan invasion and then the 1983 downing of Korean Air Lines Flight 007.  What really gave the Lada its knockout punch was increased competition, both from Japanese brands and also from Hyundai’s entrance into the Canadian market.

Dennis Signet

Mr. Dennis’s Lada importing company went out of business in late 1985… as a last-ditch effort he attempted to shed any Soviet association and eponymously market the car as a Dennis Signet, but it was futile.

1995 Lada Samara brochure Canada

Surprisingly, another importer picked up Canada’s Lada torch less than two years later.  Erhard Weitler, a West German oil broker, figured that the new FWD Samara might reverse Lada’s fortunes in Canada.  As a commodity broker with no automotive experience, Weitler bore several similarities to Ara Oztemel, and he likely took on the Lada distributorship in order to boost his status with Soviet authorities.  Regardless, he saw only modest success, and Lada disappeared from Canada in the late 1990s.

VAZ 2101 Cutaway

Chances are that if Satra’s plans to sell Ladas in the United States had gone through, the brand would have endured a similar fate as it did in Canada.  US auto reviewers who drove Ladas during the 1970s and ’80s were not terribly impressed.  Popular Mechanics said that “Russian engineers have retained the worst features of the Fiat 124… and added a few of their own.”  Road & Track noted that while the Lada offered decent passenger room and standard equipment for its price, the car drove sloppily and wandered all over the road.

While in 1980, some American consumers could have been persuaded to purchase a 15-year-old, sloppily-handling Fiat manufactured by what increasingly appeared like a belligerent country, such a product could hardly have been expected to thrive in the competitive US economy-car market.  Yugo’s experience a few years later offers a similar caution – despite a remarkably low price, it wasn’t considered competitive with even used Japanese imports.  And even in countries where Ladas achieved decent popularity, such as Finland, sales tanked during the 1980s as competition passed it by.  Perhaps the last-minute political torpedoing of the Satra Corporation’s plans to import Ladas was actually a blessing in disguise.  It’s unlikely that the American Lada would have lasted for long.

Looking back decades later, it seems remarkable that a Soviet-built car came so close to being sold in the US market.  It was all a strange journey, lasting nearly a decade, ending in disappointment, and nearly forgotten today.  While the presence of Ladas in the US car market wouldn’t likely have made much of an impact, it sure would have been interesting to see how Soviet car sales fared.  But in place of that, we can at least enjoy the rather fascinating, and overlooked, saga of how such a circumstance almost happened.