It’s Mostly Business as Usual in U.S.S.R., U.S. Firms Find

U.S. companies with investments in the Soviet Union said the political coup that toppled reform-minded President Mikhal S. Gorbachev hadn’t disrupted business Monday. McDonald’s was open and selling cheeseburgers at a normal clip, and General Motors pressed ahead with its plans to develop engine parts for a Soviet auto maker.

But analysts said the coup would almost certainly cast a pall over future investment in the Soviet Union, even if it fails and Gorbachev again rises to power. “In this climate, with the uncertainty, I would say attracting new investment is virtually impossible,” said Abraham Becker, director of RAND-UCLA Center for Soviet Studies.

Already, Chevron said negotiations over its giant Tengiz oil venture are on hold as the company watches how political events unfold. “We want to make sure we are negotiating with the right people,” a spokesman said.

Becker speculated that the new government may try to renegotiate existing deals with foreign-based companies, an act certain to discourage continued foreign investment.

In economic terms, the coup’s impact on the U.S. economy is insignificant, analysts say. Total foreign investment in the Soviet Union is a mere $3.151 billion, according to PlanEcon, a Washington consulting firm. U.S. investment is only a part of that.

The coup, however, could affect American grain producers if it leads to economic sanctions by the United States. The U.S. government has promised to back $1 billion in Soviet grain purchases from U.S. farmers--support that analysts say is now in question.

Here is an industry rundown of investment in the Soviet Union and how the coup has affected various U.S. businesses there:

General Motors and Ford both have ventures in the Soviet Union, and company representatives said Monday that they were watching events in that country closely.

Ford said it is reviewing plans to ship car engines to the Soviet Union under a $41-million agreement signed in July. The first shipment of 72 engines was scheduled for later this month, but may be delayed. “We have to wait and analyze the situation at that time,” said Ford spokeswoman Lin Cummins.

The nation’s No. 2 auto maker is also reviewing plans to ship vehicles to dealerships it jointly owns with Soviet partners in Moscow and in the Ukraine. Ford has shipped 299 European-made cars and minivans to the dealerships so far this year and had expected to ship 1,000 for all of 1991.

General Motors has a two-year-old, $1-billion deal to provide 100,000 to 150,000 engine-control systems annually to Volga Auto Works. GM spokesman Jack Harned said the systems are under development in the United States and won’t be installed for another year.

Harned was optimistic that the venture would continue, despite Soviet politics. GM’s customer, Volga Auto, “is a Soviet company that has been in business a long time through old and present regimes,” Harned said.

According to two U.S. fast-food chains, the coup apparently hasn’t dampened the Soviet appetite for hamburgers and pizza. Representatives of McDonald’s and PepsiCo’s Pizza Hut unit reported “business as usual” at their Moscow restaurants.

McDonald’s opened its restaurant in Moscow amid much fanfare 20 months ago, and Monday patrons gobbled down Big Macs in near-normal quantities, said Peter Barrister, a spokesman for the Soviet venture.

McDonald’s has an agreement to open 20 more restaurants in the Soviet Union, but even before the coup, there were no immediate plans for a second restaurant, Barrister said.

PepsiCo spokesman Kenneth Ross said the company’s ventures in the Soviet Union were also operating normally. Besides two Pizza Hut joint ventures in Moscow, PepsiCo has 25 bottling franchises throughout the Soviet Union. Under a 1974 barter agreement with its franchisees, PepsiCo supplies Pepsi syrup in exchange for Sotlichnaya Vodka.

“We have over 20 years of experience in the Soviet Union and have been through a number of (political) changes. Our approach is to wait and see how things shake out,” Ross said.

U.S. farmers have much at stake. The coup has cast doubt on the Soviet Union’s grain deal with the U.S., threatening $1.1 billion in grain sales.

President Bush on Monday suspended economic cooperation between the United States and the Soviet Union, raising the possibility that he might withdraw an offer to guarantee credit for Soviet grain purchases from U.S. farmers. It is not likely the Soviets could buy the grain--mostly corn, soybeans and wheat--without the U.S. government’s financial backing.

If grain sales to the Soviets are prohibited, some U.S. farmers stand to be hit by a “double hammer,” said a spokesman for the Illinois Farm Bureau. Many face lower prices for crops that were reduced as much as 60% by drought in the Midwest.

Grain prices tumbled in commodities trading Monday, on expectations that Washington would suspend the program to guarantee credit for Soviet grain purchases.

Paul Drazek, international trade specialist for the American Farm Bureau Federation in Washington, said it is “too early in the game” to know what effects the coup will have on agricultural trade, but he noted that the Soviets’ need for farm products will not disappear.

“It doesn’t matter what government is in place,” Drazek said. “They still need to feed their people.”

Although not a large grain producer, California has a stake in Soviet trade. In 1989, agricultural exports from the state’s ports to the Soviets totaled just under $45 million. Half of that was wheat and half was almonds.

The U.S. aerospace and defense industries, which have undergone a painful restructuring in response to shrinking Pentagon budgets, may now see the government more reluctant to cut back on military spending in the wake of the Soviet coup.

However, industry analysts ruled out any overall increase in future defense budgets or a major military buildup in response to the ouster of Soviet President Mikhail Gorbachev.

“We can expect this event to act as a brake on the downward trend in the defense budget, but it may not reverse the trend,” said Michael Rich, vice president for national security research at RAND.

In fact, El Segundo-based Hughes Aircraft said the course of events in the Soviet Union is not expected to change the aerospace firm’s ongoing efforts to wean itself off of Defense Department contracts and build up its commercial business. By the end of the decade, Hughes expects defense contracts to account for 50% of revenue, down from the current 70% level.

“The situation is far from being resolved, but we are not anticipating any change in the strategy as far as the build-down in the U.S. defense industry,” said Hughes spokesman Richard Dore.

Most airline analysts said it was too early to tell if the fast-paced events surrounding deposed President Mikhail Gorbachev will have a major impact on air travel to the Soviet Union or other Eastern European cities.

The biggest impact for the airline industry will be if “higher oil prices translated to higher fuel prices,” said Stephen Dexter, an airline analyst with Kemper Financial Services. “If the spurt in oil (prices) is sustained, then the agony the airline industry is going through will be intensified.”

Tourism didn’t suffer any immediate impact. Pan American World Airways, the only U.S. airline with year-round direct service to the Soviet Union, said it had no plans to change its flight schedule overseas. The airline operates six weekly flights to Moscow--from New York and Frankfurt, Germany--in conjunction with Soviet airliner Aeroflot, said spokesman Alan Loflin.

Loflin said a regularly scheduled flight from New York went smoothly Monday. He said there were no plans to cancel a flight today or Wednesday to Moscow.

Only two or three people cancelled their reservations Monday to the Soviet Union, he said.

Major travel agencies said no trips have been canceled yet but that the situation could change at any time.

“We’re taking it an hour at a time and see what happens,” said Bhavani Chandramouli, marketing manager for New York-based General Tours, Inc. “We’re getting a lot of calls from travelers and travel agents.”

Times staff writers Eric Young, Jesus Sanchez, Paul Feldman and Martha Groves contributed to this report.