Malcolm Bricklin's company, IAI, was in desperate trouble. They needed a new car to sell. It just so happened that a gentleman called Armand Hammer who was an international wheeler dealer was trying to put together a deal under which Yugoslavia received large quantities of oil and coal in exchange for exploration rights and Yugoslavian finished goods (many of which were of pretty appalling quality).
The reason that a deal like this was even dreamt of was because the Yugoslavs found it extremely difficult to persuade other countries to pay hard currency for their products. Hammer needed to find someone who would buy large volumes of goods manufactured in Yugoslavia for cold cash and Bricklin was brought to his attention as been someone who may have been ambitious (or crazy) enough to.
A meeting was organised between Hammer's representatives, Bricklin and Yugoslavian trade officials and it was agreed that a deal would be thrashed out under which Bricklin could buy large quantities of cars from Zastava. Briklin mentioned potential sales figures which were really just pie in the sky; to achieve them he would need to improve the Yugo considerably (which would involve bringing the Zastava plant into the 20th century) and spend a great deal of money promoting it - money that he simply didn't have. However his old magic salesmanship won the Yugoslavs over and a deal was struck.
It has to be borne in mind that Yugoslavia, although slightly liberalised, was still a communist country and so the attitudes of the management of Zastava were not considered to be important. They would have to do whatever they were ordered to do. These management people did however point out that there was already an agreement with Mr Kefurt.
A lesser man than Bricklin would never have taken the task on. The communist mindset at Zastava meant that quality was bottom of the list of priorities; they had a captive market in their home country and production numbers were all that really mattered. Innovation was positively discouraged by the command structure in which every change had to be approved by multiple bureaucrats. There was no incentive for anyone to work harder or better because they still drew a wage whether the plant was superbly efficient or chaotic (which it was).
The car they were building was shoddy and decades out of date and yet the intention was to sell vast numbers of them to citizens of the wealthiest nation on earth, many of whom saw car ownership as a route to prestige more than just a simple means of transport. The ever optimistic Briklin felt he could defeat all these obstacles; but first he had to deal with Kefurt.
Bricklin and Kefurt agreed to meet. Although he was nearly broke Bricklin rentered a penthouse suite, no less, at a top Los Angeles hotel and treated Kefurt to a lavish lunch; but no agreement was made. However a second meeting was arranged, to be held at IAI's offices in New York. How would Kefurt get there? He would drive, of course, in a Yugo. Not a good decision - it was more than 40 hours away!
He and his wife did indeed travel to the meeting in a Yugo, as he promised, but of course it broke down on the way several times, giving him a useful reminder that perhaps the car wasn't quite ready to be sold to the American public. Not surprisingly they arrived rather uncomfortably since the weather had been hot and the car had no air conditioning. In the end, bearing in mind that he still faced almost insurmountable difficulties in getting an imported Yugo to meet American standards, he agreed to sell his distribution rights to Bricklin; probably the best business decision he ever made.
The price agreed was 50,000 US dollars but Bricklin's money was running out so he could only write a cheque for about a third of that. Wisely Kefurt took the money; he did get paid eventually but he had to wait until Bricklin could raise more funds. This was achieved by selling distributorships and shares in IAI, a process that gave Bricklin some money to set up his Yugo operation, but which led eventually to his third bankrupcy. However that was yet to come - the Yugo project was underway!
Copyright © Ian Palmer 2021 All Rights reservedMeet The Yugo | Enter Michael Bricklin | The Bricklin SV1 Fiasco | Bricklin Faces Bankrupcy Again | The First Yugo In America | How Bricklin Promised Zastava The Moon | Lipstick Is Put On The Yugo Pig | America Decides The Yugo Is Awful | The Proton Saga | The End Of The Yugo