After years of false promises that a foreign investor would rescue them and that production would climb from its dismal lows, workers at the state-owned Zastava car assembly plant were given a harsh choice: accept a plan that would cut two-thirds of the work force, or go belly up.
"The reaction was not pleasant," said Branimir Soldatovic, deputy general manager.
But seeing that the choice was really no choice at all, the workers accepted the plan this summer and their factory became an urgent test of how Yugoslavia might reform its economy.
The economy today is in tatters after a decade of corruption, mismanagement, lost wars and isolation under Slobodan Milosevic, the former leader who now sits in a jail cell in The Hague, Netherlands, awaiting a trial for war crimes.
The sanctions that countries had imposed to punish Milosevic have been lifted, and international aid is starting to trickle in, but the task of weaning state-owned enterprises off the subsidies that have bled the government is monumental. If Zastava is anything to go by, the pain ahead is enormous.
With almost 30,000 workers employed at one time in its various loss-making companies, Zastava was once the flagship of the former socialist state and largest carmaker in the Balkans.
But for the reformist government that replaced Milosevic early this year, it represented a decrepit dinosaur. Aleksandar Vlahovic, minister for economics and privatization behind the plan of massive layoffs and restructuring at Zastava, says officials at the World Bank advised him to wait a while before tackling such a difficult case.
"We tried to sharpen our teeth on this one," said Vlahovic, a Western-trained corporate financier. "We guessed if we failed on Zastava we would fail in the rest of the country. Every country has one, Poland had the Gdansk shipyards, and so on."
The job has not been easy, and workers long used to being sheltered by the Socialist state have not accepted the loss of their jobs without resistance, staging violent strikes through the summer.
"It was a social bomb," Vlahovic said of the company and the town. "The former regime had been ready to fulfill any demand to keep the workers quiet."
Finally, the government persuaded the workers to nominate leaders for talks and emerged, after seven days of negotiations in June, with a plan -- cost-cutting, an elimination of subsidies, fresh government investment and extensive layoffs.
When they put their plan to a referendum, 96 percent of the work force voted for it, even though it would put nearly 14,000 people out of work, including 8,000 of the car plant's 12,000 workers.
"Basically, we touched the bottom and it was obvious we could not go down any further," said Soldatovic, the deputy general manager. "It was very difficult to explain to people, but somewhere in their consciousness there were some doubts and when we started revealing the truth, many taboos fell."
Soldatovic, who has worked with the company for 35 years, says he has spent hours explaining the harsh new realities, even daring to tell the workers that there was no future for the small, boxy Yugo cars they made, since no matter how cheap they were, no one outside Serbia wanted to buy them.
Today, several months into a wrenching overhaul, that is not entirely true. Zastava is now producing 500 to 600 cars a month, all of which are selling, Vlahovic said, adding that the main goal is to attract a foreign investor.
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