Business

Ex-IBMers from Triangle hope to make and sell small tractor in Cuba

A huge trade show opening in Havana on Monday will mark the Cuban debut of a small tractor that two former IBMers from the Triangle hope to assemble in the country and sell to Cuban farmers.

If Saul Berenthal and Horace Clemmons are successful, their company, Cleber LLC, would be the first American manufacturer to set up shop in Cuba since the revolution and the subsequent U.S. trade embargo more than 50 years ago.

There are a number of hurdles, the most immediate being a license to do business in Cuba from the U.S. government. But Berenthal of Raleigh and Clemmons, who lives in Alabama, are confident Cuba's small farmers want and need the small tractors they plan to make.

“Big tractors could do an equivalent job on a small farm, but they’re overkill and they cost a lot of money,” said Berenthal, who fled Cuba as a teenager after the revolution and has lived in Raleigh since the 1970s. “We believe that this one is a good fit for their needs as well as for their ability to own it.”

President Obama's steps last fall to bridge the cold war chasm between Cuba and the United States have improved the prospects for commerce between the two countries. He eased restrictions on travel and the flow of money and created exemptions to the trade embargo that allow American companies to sell products to private entities in Cuba in limited economic sectors, including agriculture.

But Congress has not moved to lift the trade embargo, with its myriad restrictions that include bans on extending credit to Cubans and doing business with the Cuban government, which owns many businesses in the country. Even without the embargo’s rules, there would be other cultural and economic challenges to manufacturing and selling a product in an impoverished nation that has been estranged from the U.S. for half a century.

Berenthal and Clemmons are basing their hopes on an updated version of the Allis-Chalmers Model G tractor that was introduced in the U.S. in 1948 and discontinued seven years later. The small, rear-engine tractor is simple to make (all the original patents have expired) and relatively inexpensive, retailing for the equivalent of about $8,000, Berenthal said.

They call it Oggun, after the spirit of metal work in the Afro-Cuban religion of Santeria. They expect it will be coveted by the country’s 70,000 non-government farming coops and small independent farmers, who now rely on animals and aging Soviet tractors to plow their fields.

Initially, the Oggun’s parts would be made by a contractor in Mobile, Ala., and shipped to Cuba, where they’d be assembled. Cleber can’t buy steel parts in Cuba now because the government owns the steel industry, but Berenthal said they hope the U.S. will eventually drop that restriction.

The Cuban government has signed off on the enterprise. It has agreed to let Cleber build a manufacturing plant in the Mariel Special Economic Development Zone, an industrial area for foreign companies adjacent to a massive new port west of Havana. Cleber applied for a license from the U.S. Treasury Department, which enforces the trade embargo, in late June, but is still awaiting a decision.

“They say they’re working on it,” Berenthal said. “Hopefully, ‘working on it’ means they’re looking for reasons to say yes, because if they wanted to say no they could have done that a long time ago.”

Cash on delivery

There are other challenges. Peter Daniel of the N.C. Farm Bureau says the ban on selling on credit will hurt any American enterprise hoping to do business in Cuba.

“Until Congress authorizes credit, we can’t run a credit card down there. So it’s cash on delivery,” Daniel said. “It’s got to be a really special item for them to buy from the United States when other countries are extending credit.”

Daniel was part of a group of about 28 state and private agricultural officials from North Carolina who visited Cuba in September. Their aim was to learn about Cuba and build relationships, so that North Carolina will be ready to do business when the embargo restrictions ease or disappear.

Daniel was part of another North Carolina delegation that visited Cuba in 2000. He says this time there was a greater sense of openness and freedom and more entrepreneurship, albeit with outward devotion to Fidel Castro, whose picture hangs on the walls of all the new private restaurants. On the waterfront of Havana, he says, still hangs a large, weathered banner with Castro’s picture and the Spanish words “Socialism or death.”

Daniel is confident businesses in the U.S., particularly in the Southeast, will one day engage in a healthy trade with Cuba when the embargo is lifted. For now, though, he says he’s not sure there’s a large market for an American tractor.

“I’m not sure if there’s a lot of extra cash in the system to be investing in equipment,” he said.

Berenthal is more optimistic. For starters, though Cuba’s small farmers must set aside a portion of their products for the government at set prices, they’re able to sell the rest to the growing number of high-end restaurants and resorts, making them a key supplier to the country’s important tourism industry. That makes them a good risk that should be able to get cash or credit through relatives or nonprofit organizations in the United States or loans from Cuban or European banks.

A long partnership

This is not the first joint venture for Berenthal, 71, and Clemmons, 72, who met at IBM about 45 years ago. Berenthal was visiting the Triangle from New York, working on a project at the company, when he needed to summon the weekend on-call tech support person. He wasn’t sure the company had sent the right person when in walked Clemmons wearing the overalls he put on to work in his yard.

From that inauspicious beginning began a friendship that eventually led to a business partnership. They left IBM in 1983 and established, built and sold three companies in succession that made software for the retail industry.

This is their first tractor. But Berenthal and Clemmons say they’ve got the background to make their venture work, Berenthal in Cuban language and culture and Clemmons in agriculture. He remembers plowing with mules on his grandfather’s farm in Alabama and now owns 2,800 acres in northern Alabama.

But more importantly, Clemmons says, is having a product that will help Cuba’s small farmers.

“We’ve built successful businesses by doing one thing: Listening to somebody’s problem and solving it,” he said. “We made money with the software, but we made sure that we were listening to our customers and doing what benefited them.”

Cleber hopes to sell 150 Ogguns the first year, building up to about 500 a year within five years, Berenthal said. Long-term goals include an electric model and exporting tractors from Cuba to other Latin American countries with similar small-farm economies.

Berenthal and Clemmons are very aware that they’re doing something no American company has done before. They hope others will follow.

“One of the most important things we believe about what we are doing is that we are setting a precedent,” Berenthal said. “If we can establish the framework under which the U.S., under the embargo, can give us a license to do what we want to do in Mariel, we have now created means for other companies in the U.S. to use that as a model to make other investments in Cuba.”

Richard Stradling: 919-829-4739, @RStradling

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