Interview with Bohdan Kulchyckyj for "Business Class Magazine"
2010-08-30Bohdan, you first came to Ukraine in 1992. What kind of professional experience did you have at the time?
Bohdan Kulchyckyj:
My previous professional experience had nothing to do with cars. After graduating from Rutgers University with a BSME degree, I worked as a machine design engineer. My job was to generate various engineering drawings. And I had to draw them on paper by hand, because computers were not yet widely used in engineering at the time. Later I was promoted to head our company's unit in Chicago, where I did engineering work for the world's largest pharmaceutical companies.
Are you a native-born American?
Bohdan Kulchyckyj:
Yes, I was born in Philadelphia.
And yet, you are of Ukrainian descent. How did your family come to live in America?
Bohdan Kulchyckyj:
My parents were bom in Ukraine and immigrated to America in their childhood years during World War II. My father was 16 at the time. He was born in the village of Kulchytsi in Lviv region. Our last name originates from the name of that village. My mother left Lviv with her family at the age of eight. My mother's father was a professor at the Lviv University and her mother sang at the Lviv Opera Theater. Having gone through the difficult stages of emigration, my parents settled in Philadelphia. There was a Ukrainian church in that town and many Ukrainian immigrants settled there. They lived as a community. They spoke their native language and preserved their original culture and traditions.
How did you meet Mr. Hyniansky, the owner of Winner Imports Ukraine?
Bohdan Kulchyckyj:
I remember that meeting very well. Mr. Hyniansky is also an American of Ukrainian descent. However, he belonged to a different class than my parents. He was well off and ran a successful business. My family, on the contrary, had much lower incomes. Our paths seldom crossed both in business and in everyday life. Yet, both Hyniansky and my family took an active part in the life of the Ukrainian community. Hyniansky financed different projects implemented by the Ukrainian community in Philadelphia, and as he trusted my father, he would often ask him to take care of his money. Once I came to Hyniansky together with my father to get a check. I was 13-14 at that time. Several years later, the Ukrainian community held a debut ball and the Hyniansky family asked me to accompany their elder daughter there. On that occasion, we then got together for a dinner and met for the second time. So you can say that I grew up before Hyniansky's eyes. He had known me since childhood and that was probably one of the reasons why it was I who was offered to head the company in Kyiv.
Many Americans, who come to Ukraine, saw it as a spring-board that may help them launch their own career. What did you think of the offer to work here?
Bohdan Kulchyckyj:
When the market started developing in Ukraine, different sorts of people began to come here viewing Ukraine as a promising country. Some of them would really come here for two or three years to build a career in their company. If you succeed even in a small representative office abroad, the entire company will know about it and you may get promoted. Others would come to make quick money. They would set up small businesses in Ukraine for the sole purpose of making money. I did not belong to either type. I was proud of being Ukrainian and was glad to have an opportunity to come here and work. At the same time, I did not know how long I would be staying here and had no idea what awaited me in my career and my personal life, as I was still single at that time.
Later, when I was married and we were expecting a baby, I decided to return to America. From a medical standpoint, Ukraine was no comfortable place for having babies. That 'break' lasted five years. During that time, my two children were born. In 2002, I came back here again. In total, I have been living in Ukraine for thirteen years now.
It would be interesting to talk to you about the Ukrainian business mentality, as you can perceive it 'from the inside' as a Ukrainian and at the same time as an American. What do you think is the difference between a Ukrainian businessman and an American one?
Bohdan Kulchyckyj:
The answers to this question keep changing every three years. Back in 1992, my answer would have been different from today's. Ukraine has changed over the past 18 years, and so have business in Ukraine and my ideas of many things. It is a philosophical question, and the answer to this question cannot be black and white.
As to the main mission of business, in Ukraine, like everywhere else, people want to earn money, receive a profit and live a good life. How can you achieve that? Naturally, one must work hard, bring benefits to his company and, as a result, move up the career ladder. Unfortunately, in Ukraine many people in business depend on relationships: it matters who you know, who are your friends and how you help each other. Their work is focused on relationships rather than on the result of their work in the company. This phenomenon is less common now, but it still exists.
I also have another observation: Ukrainians are very hard-working and they can work well within a certain system. You could even say that, within a system, Ukrainians work much better than anyone else. However, when Ukrainians go beyond it, they do not always know how to handle the situation.
What has struck you as the most negative in Ukraine?
Bohdan Kulchyckyj:
Corruption.
But America also has a corruption problem.
Bohdan Kulchyckyj:
Average Americans do not come across corruption. Yes, there are exceptions. There are situations when a meeting with an influential person can be arranged for money, but that is not part of the everyday life of an average American businessman or any other ordinary American. Americans do not pay to the police or school headmasters... In Ukraine, corruption is wherever you go, it is everywhere.
Have you given bribes?
Bohdan Kulchyckyj:
No, I cannot do that. That would humiliate me as a person. Yet, having lived here for many years, I began to look a bit differently at the things. How can you survive on $200 per month? After a while you realize that bribes are the money that people need to survive. They are like additional payments necessary to bring the public officials' salaries to an adequate level. But an end must be put to such practices sooner or later. Corruption ruins the country.
Two years ago you said that you were planning to give most of the top management jobs in your company to Ukrainians. Have you done that? Don't you think that Ukrainians could be more useful for your company? They understand the local realities better, don't they?
Bohdan Kulchyckyj:
The top positions in our company must be held by Ukrainians. We are working towards this goal. Even the recent crisis helped us here. We had to cut our staff, and it was mainly our foreign employees who were laid off. Today, two out of the four companies belonging to the Winner Group of Companies are headed by Americans, and the other two companies are headed by Ukrainians. By the way, our Financial Director is Ukrainian and that is a very important position.
In fact, employment of Ukrainians is less expensive. Not in terms of wages, but in terms of the related costs associated with employing Americans, such as accommodation rent and air travel. At the same time, trust is a very important factor in business. It is often easier to work with expats because they understand you better.
Your company is said to have a rather democratic management system and a high level of responsibility among mid-level managers. But if they make any mistakes, who will the ultimate responsible person?
Bohdan Kulchyckyj:
The ultimate responsibility is always mine. If there is no particular person in a company to bear responsibility, it will fall apart. That's all. In Ukraine, however, it is a common practice to engage in blame-shifting and finger-pointing. I cannot recollect any Ukrainian minister ever saying: «This is my fault. I apologize.» Instead, what you always hear us: «I didn't know anything, so I didn't do anything, it is all someone else's mistake...»
It was probably a pleasant experience to bear responsibility and report on the results before the crisis, when the market was still operating at a tremendous pace.
Bohdan Kulchyckyj:
Yes, everyone was a genius then (laughs).
And you were a super-genius above the geniuses.
Bohdan Kulchyckyj:
Yes (laughs).
And now that there is a fight over every client, what managerial features are needed, in your opinion?
Bohdan Kulchyckyj:
You must be able to take quick and 'careful' decisions. You cannot postpone any decision for tomorrow. And you cannot avoid making decisions. It is better to take at least some decisions than none.
When we entered the crisis, we had over €100 million worth of goods granted as security. It was very important then to sell them off and return the money to the banks. We did it and repaid our debts down to the last cent. We cut the company's costs quickly and accurately and that also greatly helped us to weather the crisis.
Can you tell us about the mistakes you made during the crisis? At least the most significant ones.
Bohdan Kulchyckyj:
We went to the stock exchange and converted hryvnias into euros to repay the loans. On the next day, the euro/hryvnia exchange rate went down and we lost our money. Of course we could not know that the euro would drop, but it was a mistake anyway. It was also a big mistake that before the crisis we spent money too easily, we allowed ourselves many things. We built a new office on the outskirts of Kyiv with a swimming pool and a fitness center, so that the employees could work more comfortably. And I thought it was right. Now that the crisis has hit us so badly, I believe it was a mistake. Still, when the situation changes for the better, I will think again that it was right (laughs).
Actually, I make ten small mistakes per day... As for other 'global' mistakes... No, I cannot think of any.
You always top rating charts. You have been recognized as the best manager in the automobile sector. I must confess though that I question all our ratings. What is your attitude towards diplomas and awards? Do you put them up on your walls?
Bohdan Kulchyckyj:
No, you can see that there are no diplomas on my office walls. In fact, I never try to influence the results of this or other rating, and material awards are of no importance to me. The greatest reward in my life is the upbringing of my three children.
In April, for the first time in two years, the media reported car sales growth. Does that mean that the car retail market is going up?
Bohdan Kulchyckyj:
Is the market growing? Is that an event to be proud of, or to write home about, as the Americans would say? No, we are very far from being proud of a strong automobile market. In April 2009, 13,600 cars were sold in Ukraine, while in April 2010 we sold 14,100 cars, that is, 3.9% more. Looks like growth. Yet this growth is only 500 cars for the entire country. In fact, that is nothing. But if you take the total number of cars sold in the four first months of this year, we can see a 27% year-on-year sales decrease. During the first four months of 2009, 62,907 cars were registered, but only 45.600 were registered during same period in 2010. It was the effect of January 2010, which was very difficult and much worse than last year's January. In total, 174,000 cars were sold in the country last year, and this year I predict this figure to be 170,000 cares, which means that the situation will not change.
There is a positive moment though. The market has stabilized, it is predictable, and the companies have optimized their operations over this period of time.
Are you operating at a loss now?
Bohdan Kulchyckyj:
The first two months of this year were very difficult. So far, there is nothing to be proud of. I hope that in one year's time we will break even. Breaking even under such conditions is good.
What do you think of the automobile retail development scenario? Optimists say that in two or three years it will reach the pre-crisis level. Pessimists speak about the future collapse of many companies, especially if the country opens its borders to old cars.
Bohdan Kulchyckyj:
I do not believe that the situation will return to the pre-crisis level within the next five years. It is true that before the crisis we saw an abnormal and artificial demand practically for everything. Kyiv's real estate and land prices were unrealistic... We will not see this hysteria anymore. People will become more attentive and less emotional.
At the same time, I do not think that we will be facing a collapse. First, our market has dropped the most in comparison with the European markets. Before the crisis, 700,000 cars were sold in the country per year, and now - 170,000, so there has been a five-fold decrease, and that came as a shock. If the market plunges by another 20,000 cars, it will not be so shocking any more. As far as our company is concerned, it is a rather small company and it can respond to any external changes in a timely and flexible manner, so for us personally there is no threat of collapse.
If Ukraine joins the European Union and opens its borders to second-hand cars following the example of Poland, it may become an additional problem for the industry. But this definitely won't happen in two years' time. As a matter of fact, the market will be affected by events which we cannot fully predict. I mean the technology and ecology. It will be the advent of new modern environmentally friendly cars and electromobiles that will affect the automobile industry development scenario much more than any other factors.
Are you planning to add new brands to your portfolio?
Bohdan Kulchyckyj:
No, we are not planning to add any new brands. I still cannot see any brands that we would be interested in.
And yet, now is a good time for development. Some of the dealers, with whom we used to cooperate, wound up their business during the crisis. So we can occupy their niches. We are planning to launch our own dealer center for Porsche cars in Kyiv. Now is a good time for buying land and building dealer centers, as land and construction have become less expensive.
Have you counted how much your company costs now?
Bohdan Kulchyckyj:
To estimate the value of a company, you need to find someone who will be willing to pay for it. I can tell you that it is worth €150 million, but if no one is ready to pay the money, it means it does not cost that much. So, a company costs as much as someone is ready to pay for it. Hardly anyone is buying anything these days. I am sure that today our company costs less than it did before the crisis, and yet its value will grow some day.
You have achieved the maximum as a hired manager. What's next? Are you planning to set up a company of your own?
Bohdan Kulchyckyj:
If I had the answer to this question, my life would be much easier. The last nine years have been very exciting for me. I did achieve the maximum before the crisis and I survived its blows, which was a wonderful experience. Now I feel like I am back in 2004, that is, I have returned into the past, and that bores me. I am not interested in working just for money. So, I am in the process of searching: should I set up my own company or acquire shares in a business or should I go into politics? I know that I could do something in politics, but the question is whether I will be allowed to do anything. I have not made any big fortune yet. I think one should first earn some money and only then go into politics. One should go into politics not to make money but only to change the lives of people in their country for the better. In short, let us meet two years later again and I believe I will be able to answer this question.
