If you’re my age, you might remember Yugoslavia
as a sort-of Communist country that was a nice place to go on holiday. But you’ll definitely remember it for the
cheap, tiny hatchback thrust upon an unsuspecting public – the Yugo. It went from an amazing new inexpensive car
to the butt of many a joke in a short space of time, then suddenly disappeared from sale. What were the Yugo’s origins, why did its
meteoric rise end so suddenly, and what happened to the company behind it? This is the Yugo Story. (music) Yugoslavia was occupied by the fascist Axis
Powers during the Second World War, but from this came a vehement Communist resistance. They gained power through a popular vote after
the war, ruled by Josip Tito. Like many Communist Governments, they decided
democracy was overrated so became the permanent rulers. But unlike the other Eastern Europe Communist
nations, they were independent from Russia’s control. A country that wants to chart its own course
also needs to look out for its own economy, and one thing every country needed in the
20th century was vehicles. Zastava was a company that had been founded
in the mid-19th century making armaments, and in the early 20th century started producing
military vehicles. 100 years after the company was founded, in
1953 workers voted to start civilian car production, and reached out to Western car companies for
help. Like many other Communist countries Zastava
agreed a deal with Fiat in 1954 to produce the Fiat 1100, 1400 and Campagnola. They soon moved on to the practical Fiat 600,
renamed the Zastava 750 as it had a larger 750cc engine. Car production started slowly – just over
1,000 cars left the factory in 1955, and three years later it wasn’t much higher, but Zastava
would export to other Communist countries such as Poland. The Yugoslav economy blossomed and by the
late 1960s Zastava was producing around 50,000 cars a year. In 1971 Zastava introduced their own version
of the Fiat 128, the Zastava 101. But where the Fiat 128 was a saloon or an
estate, the Yugoslav version would be a practical 3 or 5-door hatchback. The larger 1.1L engine made it a better car
to drive than the underpowered Zastava 750. The 101 sold well in Yugoslavia, with independent
rear suspension that coped well with challenging Eastern European roads. It would show up in Egypt and Poland, and
there were even rumours Fiat would sell it back in Italy. The 101 was a modern front-engined hatchback,
beating Volkswagen’s Golf and Fiat’s own 128 coupé to the market. The plucky little 101 won its class in the
1973 Tour of Europe rally. But rallies are one thing, long-term daily
use is quite another. The car quickly got the nickname “Stojadin”,
both a male name but also close to “sto jada” or “a hundred woes”, for its truly
awful quality, thanks to poor assembly. Quality on the 101 might not have been so
bad that the wheels would fall off, but the wheels were falling off the Yugoslav economy. The oil crisis quadrupled the price of oil
that Yugoslavia had to import. A series of disastrous economic errors by
the government meant a buoyant economy had gone into recession. With the smaller 750 looking a bit long in
the tooth, Zastava looked for a replacement. By this point they felt confident enough designing
a new front wheel drive hatchback themselves, beginning in 1975. However, Zastava would lean heavily on Fiat
to help them produce the new vehicle. The first prototype was ready by 1978, called
the Zastava 102, and soon testing began in both Italy and Yugoslavia. As development progressed the team evaluated
their engine choices. The two candidates were an 848cc engine, and
the 1.1L engine from the Zastava 101. The smaller engine was abandoned as it was
too weak, but the larger 1.1L engine was too expensive for the new entry-level car. In the end Zastava decided to take the 900cc
44hp (33 kw) engine from the Fiat 127, giving the small car adequate if not compelling performance
– the 0-60 time was over 20 seconds. The new car, renamed the Yugo 45, was launched
at the Belgrade Motor Show in October 1980, with deliveries promised just two months later. True to their word, by the end of the year Yugos
were being delivered to lucky Yugoslav customers. Zastava, and the Yugoslav Government had grander
goals though. With Ladas and Ĺ kodas selling in Western
European markets, they felt their new economical hatchback could more than compete, and hopefully
take some sales away from Western competition. By 1983 the Yugo had arrived on British shores. It escaped the scathing reviews reserved for
Ladas, but its main selling point was its low price, especially in an increasingly crowded
supermini category. But all sales generated profit that helped
Yugoslavia’s struggling economy. That same year Zastava presented the more
powerful 54hp (40 kW) 1.1L Yugo 55 at the Belgrade Motor Show. It featured an updated interior with velour
seats, front headrests, and a reversing light. The larger engine allowed the car to compete
with Western competition with a 0-60 time around 16 seconds. Sales continued to increase, and Zastava started
exporting to countries around the world. (USA national anthem) Malcolm Bricklin is a larger-than-life American
entrepreneur. He began his business career turning his dad’s
building supply business into a franchised chain at the age of just 19. He sold his interest in 1960 after dozens
of lawsuits were filed on the company, shortly before the company’s bankruptcy. By the mid-60’s he was in Japan looking
for scooters for his new rental company. Fuji Heavy Industries had such a scooter,
but Fuji were exiting the business. Bricklin’s eye fell on their tiny Subaru
360, that looked like a Fiat 500 had rear-ended a VW Beetle. He realised that at 900 lb (410 kg), many
of the rules for US cars didn’t apply to it, meaning he could import the car into the
US pretty much as-is, selling the small car as a cheap alternative to Detroit’s land
yachts. Bricklin founded Subaru of America, and both the
360 and the FF-1 Star appeared on American shores. The company went public, and Bricklin became
a very rich man. For his next venture he decided to build his
own car – the SV-1, or “Safety Vehicle 1”. It used innovative plastic bodywork, and dramatic
gull-wing doors. The sports car went toe-to-toe with Chevrolet’s
Corvette, but it was unreliable and the whole project ended in failure after producing less
than 3,000 cars. Bricklin started US imports of the Fiat X1/9
and the 124 Sport Spider, marketing them as the Bertone and the Pininfarina Azzura. But when Cadillac started a joint venture
with Pininfarina, they put pressure on the Italian company to cancel the deal with Bricklin. This left Malcolm Bricklin looking for a new
project. He’d had great success bringing the low-cost
Subaru to North America. With Americans still concerned about rising
fuel prices, could he do the same again? His team scoured the planet looking for a
new low-cost car, and they soon homed in on the Yugo. American businessman Miro Kefurt was already
in negotiations with Zastava to import the Yugo to America. However, despite showing it at the 1984 Los
Angeles Auto Show, these plans came to naught, leaving the path open for Malcolm Bricklin. Knowing little to nothing about Yugoslavia
or indeed even the Yugo, Bricklin’s team headed off for discussions at Zastava’s
factory. Bricklin was shocked by the shambolic conditions
at the factory compared to Western car companies. Men were welding without goggles in a show
of machismo, and some slept in completed cars. But he found the seeds of something he could
sell, so did a deal to import the 1.1L Yugo 55 into North America. With Zastava workers being paid almost 30
times less than US auto workers, he believed he could sell the car for less in the US and
still make a profit. All the optional features were thrown at the car to
make it something American customers would buy. Bricklin brought in experts to help with metallic
paint, and he educated Zastava on US regulations so the car would be street legal. Back in the US, Bricklin, ever the salesman,
made a flashy video to encourage franchised dealerships across the country. Disadvantages were turned into advantages. There were no expensive computer chips to
go wrong or diagnose, the spare wheel in the engine bay would absorb energy in a frontal
impact and key lock doors meant the keys couldn’t accidently be locked inside the car. Bricklin then started on convincing the American
buying public. Endless flashy adverts pitched the Yugo as
an inexpensive starter car, or a second car at just $3,990, about ÂŁ7,000 ($9,800 USD,
€8,200, $12,700 AUD) today. He even made the Yugo the official car of
the US volleyball team! In typical showmanship, Bricklin made much
out of the Yugo using the space age material “Lexan” for bumpers and other parts. However, Lexan was nothing more than a polycarbonate
developed before the space age had even begun - in 1953. If you believed Bricklin, the Yugo could do
everything, except maybe jump a bridge! Soon pre-orders began flooding in, up to 100,000
according to Malcolm Bricklin, with some people paying thousands above the list price as American’s
waited for this new wonder-car from Yugoslavia. Zastava had to ramp up production to satisfy
demand, with three shifts working 24 hours a day producing one car every 10 minutes. But as the car neared release in the US, cost
became a major concern. Bricklin had promised the car in the US for
less than $4,000 – any more and the car wouldn’t have been competitive. He’d promised $500 per vehicle to the dealers,
and Bricklin’s company also needed to make some profit, but this left precious little
profit for Zastava. Nothing in fact. Costs for the Yugo had risen because US compliance
items had to be purchased from outside Yugoslavia. Matters reached a head, and Bricklin headed
to Zastava’s factory. He told the company bluntly that they weren’t
going to make any profit from the deal. With a poor economy, some work was better
than no work, so Zastava had no choice but to accept, maybe hoping to establish themselves
in the US and make profit in the future. There were hopes of up to 150,000 sales in
the US by 1988. But the Achilles heal of Zastava, quality,
raised its ugly head. Zastava quality had never been high, and with
hiring new people to produce the Yugo due to increased demand, mistakes were being made. To make matters worse, quality wasn’t Zastava’s
number 1 issue, as any problems found after the car left the factory were Bricklin’s
problem, and with no profit there wasn’t the cash to solve the underlying production
issues. Bricklin would set up two production lines
– one specifically for US Yugo’s, but quality issues remained. He would later joke that Subaru dealers hated
him because they made no money from warranty issues, but he made that up by importing the
Yugo! The Yugo GV or “Great Value” arrived on
American shores, allowing journalists to finally try it. They found a light car that was down on power
and with fit and finish issues, but a good deal compared to other cheap imports such
as the Hyundai Excel that cost 50% more. The public laughed at the Yugo, but Bricklin
and the dealers were making money from this little car. The flashy commercials continued to drum up
sales. Bricklin would give you $50 if you bought
any other car under $5,000. The challenge was finding another car under
$5,000! Competitive loans did what was necessary to
get people with little income into a brand-new Yugo. Soon Bricklin launched the higher spec GVX
model with a larger 1.3L engine, putting performance on par with its competition, and air conditioning
was now an option – almost a necessity in parts of the US. Bricklin attempted to take the car further
upmarket, with alloy wheels, a sunroof, trim kits and eventually an automatic gearbox. Customers were generally happy with their
purchases, at least in the first year or so. In 1987 a Popular Mechanic’s survey showed
that most customers felt the workmanship was excellent, and most said they’d buy one
again. But the Yugo became the butt of many jokes,
and prospective customers felt they’d rather be seen in a used car than a brand-new Yugo. To make matters worse, resale prices weren’t
great. Yugo in North America had all the signs of
a fad, something borne out in sales figures that were already tailing off by 1988, the
year Bricklin sold his stake in the business for a cool $20M (£14M, €17M, $26M AUD). Back in Europe, sales were steady. The over 500 improvements Bricklin had encouraged,
including the larger engine were offered in Europe which kept the car somewhat competitive. Zastava even released a convertible. But even after US sales dropped off, Yugo
sales continued to grow towards the end of the 1980s. The future looked bright for Zastava. They agreed a deal with Fiat to sell the Yugo
as the Innocenti Mini in Italy, and Zastava released a new Yugo – the 1990 Florida,
also known as the Sana. It was based on the Fiat Tipo and styled by
Italdesign. Western European reviewers again called out
the poor attention to detail. I’m sure the US distributors were looking
to sell Yugos new car, but sales came to a sudden halt. The late 1980s had been a tumultuous time
for Eastern Europe, with one Communist Government falling after another. Yugoslavia’s economy had been in meltdown
for several years – in 1985 inflation had reached 70%. But rather than the swift transition to democracy
other countries had seen, latent ethnic tensions erupted into a full civil war in 1992. Trade sanctions on Yugoslavia meant Yugos
or spare parts couldn’t leave the country, and parts to build the Yugo couldn’t enter
the country. Foreign Yugo distributers had no choice but
to shut up shop. The UK distributors held a fire sale, meaning
the Yugo 45 could be had for as low as £2,000 ($2,800 USD, €2,300, $3,600 AUD). But with no chance of spare parts, even buying
one at that price might be seen as a fool’s errand. Many of the 8,000 parts for the Yugo came
from all over Yugoslavia – politicians had wanted it that way to gain votes. But this made car production in the middle
of a civil war practically impossible, although amazingly, limited production did continue. The war tore Yugoslavia apart, and Zastava
quite literally – the factory was bombed by NATO in 1999. Production limped along in the new country
of Serbia. Zastava held talks with Hungarian firms to
start production of the Yugo there, but this came to nothing. After trade sanctions were lifted, the new
Government got a £36M ($50M USD, €42M, $65M AUD) loan to reorganise the company and
get it ready for privatisation, although with Zastava also producing defence items such
as guns that were seen as a better bet for privatisation, it’s felt not much money
ended up improving car production. With the original Fiat engines being ancient
by this stage, new Peugeot engines were sourced. Zastava hoped to breathe new life in the Yugo
with an electric version in 2002, plus an updated body they showed at the Belgrade Motor
Show. But these versions never saw the light of
day, and with these cars being so out of date, all hopes of exporting Yugos seems to have
died. Or had they? Malcolm Bricklin appeared on the scene again,
proposing to sell the Yugo once more in the USA, under the cunning name of the Zastava
Motor Works or ZMW as Americans would say. Understandably, BMW took a very dim view to
that name! It was all academic though as Bricklin’s
grand plans failed to materialise. This was a dire time for Zastava. They were doing what they could with outdated
tooling and little funding. Half the factory was an abandoned, bombed-out
shell. Audi were making cars in Hungary, Dacia was
thriving thanks to Renault. Without a deal, the factory would close, and
with it the surrounding economy. In 2005 though, a deal was done to produce
the Fiat Punto as the Zastava 10. But sales never met Zastava’s projections,
leading the venerable company, with roots going back to 1853, to declare bankruptcy
in 2008. With it, production of the Yugo 45 ended,
after producing almost 800,000 cars, 250,000 of which were exported. Zastava’s assets were purchased by Fiat,
who poured money into the factory to modernise it, reopening it in 2012. It’s grown to employ over 2,000 people and
in just 6 years had produced over 500,000 vehicles. Yugo made TIME’s “50 Worst Cars of All
Time”, and has been voted as the worst car of the millennium, but that’s an unfair
assessment. Many owners treated this cheap car with little
respect, failing to service it regularly. But treated well, the Yugo can give years
of trouble-free motoring. It’s based on the tried and tested Fiat
127 and 128 mechanics, which lasted many Fiat owners for years, so this shouldn’t be a
surprise. Yugos can still be seen on the roads of the
former Yugoslavia, a testament to the macho welders who didn’t need googles, and occasionally
slept in their completed vehicles, but who worked hard to produce a plucky little car
that allowed many to afford their first brand-new car. If you want to see a great documentary from
the mid-2000s, when Zastava faced oblivion, there’s a link above, and in the description. Bricklin’s SV-1 didn’t have a cigarette
lighter, because he believed that it was dangerous to smoke while driving. Smoking was a way of life in Yugoslavia, so
the Yugo not only had a cigarette lighter, but two ashtrays! Zastava might have made a lot of cars, but
they weren’t the only game in town. In 1985 they made around 40,000 cars, but
this was only 17% of the cars made in Yugoslavia, that included Renault’s, Volkswagen’s,
Opel’s and Citroën’s. Well, that was my take on the Yugo Story,
I’d love to see what Steve Martin’s take was!
I never knew the story and this is vers interesting