Why Everyone Believes The Soviets Were To Blame For Rusty Italian Cars

One of the things I never fail to find entertaining about cars is the mythology that can spring up around them over time. Famous owners, mysteriously missing vehicles, cars buried in the back garden, there’s a long list of myths and legends that have developed over the roughly century and a half since we removed the horse as the primary propulsion method for people and goods. As something of a hopeless lover of the more casual side of Italian cars, I’ve encountered one myth in particular over and over through the years.

Back in the fall of 2012, I purchased my first Fiat 500, barely a year after the brand returned to the US after bowing out in 1983. While I was initially just trying to get a car that I could easily park on tight city streets, I quickly found myself adapting to the role of “brand ambassador;” answering questions, letting curious folks poke their head in as I loaded groceries in the back, or even talking to other drivers as I waited at stoplights. It was far more attention than I was used to getting, as I’d previously been in an eight-year-old, white BMW 325i that felt like the vehicular incarnation of a basic Men’s Wearhouse business suit. It wasn’t long until I started hearing “Fix It Again Tony,” which I’d somehow known about since childhood, even though I wasn’t a car kid, but also another repetitive line; “back in the day, they rusted away because they were made with Russian steel.”

As the owner of a modern Fiat, I thought nothing of this. My car was built in Toluca, Mexico; it obviously didn’t have any Russian parts, and it was nearly brand new, yet I heard it over and over from guys who I just assumed were parroting whatever nonsense their dad told them back in the day. It wasn’t until I started dabbling in vintage Italian cars that I realized just how deeply canonical this was in the overall car culture. And yet, nobody ever seemed to have any story to tell beyond this. It was this weird dead-end of a statement that I learned to just smile and nod through, because just as they didn’t seem to have anything to go with it, I didn’t really have any rebuttal besides “well, everything rusted back then.”

Where Did This Myth Even Come From?

Fresh off my adventure in exploring the more unusual end of Fiat history and riding high on the rush I always get from obscure research, I decided to chase the rabbit hole of Soviet steel. Initially, I reached out to a few people I knew had been in the Italian car game for longer than I have to see where they first heard the story. While I’m approaching my thirteenth Fiat-iversary, I still consider myself a novice compared to many in the community. There were nearly as many stories as people I asked, ranging from leftover feelings about the poor quality of Italian tanks in World War 2 to a government-forced buyback of prematurely rusting cars, a couple answers of not having any backstory just like how I’d learned it, and one person who said he’d never heard the myth, which I’m not entirely sure I believe.

The one story that eventually stuck out, with a grand total of three answers, was “it goes back to Fiat building a plant in Russia.” One friend who was formerly a service manager for a Fiat dealer in the early ’80s even recalled corporate higher-ups trying to dispel this rumor while he was still working there.

Here was a story that made a good bit of sense on the surface: Fiat struck a deal with the Soviet Union to build an assembly plant in Tolyatti, (sometimes spelled Togliatti or Togliattigrad) so the Russians could build a localized version of the Fiat 124, aka the Lada. As the Soviet Ruble wasn’t exactly the best currency internationally, they agreed to partially pay for this by trading steel back to Fiat. This steel may have been melted down tanks, scrapped ships, or just generally poor quality. Fiat then built their cars in the 70s and 80s using this metal and thus they dissolved like a sugar cube in a hurricane. This made a fair bit of sense as Fiat was not the only western company I’d heard of managing to do business inside the Soviet Union. For one, Pepsi was known to be exchanging their product for Stolichnaya vodka in the early ’70s. Towards the fall of the Soviet Union, they took obsolete warships as payment, including the legendary seventeen submarines, which supposedly gave Pepsi one of the largest navies in the world for a brief moment. In the late ’80s, my own mother worked for Spectrum HoloByte, the video game company that published the first version of Tetris outside of the USSR. But could any of this actually be proven in the case of Fiat?

Is It Even True? The CIA Might Know

Finding documentation from Fiat itself would be difficult at best. First of all, I don’t live in Turin, I can’t just turn up and ask to rummage through old paperwork. Second, Fiat doesn’t really keep records quite like some other car companies. For example, when I had my 1982 Corvette, I was able to easily order photocopies of the build sheet and Monroney sticker from the National Corvette Museum. When I was importing my Fiat Marea, we found it had no build date documentation, so I went with the date of first registration in the UK for the import paperwork. The likelihood of steel purchase records still existing from fifty years ago is extremely slim.

What did Fiat have that would be tracked closely by an outside source? Who closely tracked the ongoing developments of such things? Well, Fiat had communists, and they were making deals in a communist country. Few organizations tracked communists quite like the Central Intelligence Agency. Sure enough, the CIA had their eyes on Fiat and the local Torinese communists, just like they had been watching the developments in Russia. On top of that, it turns out that Fiat wanted to purchase tooling for this new Tolyatti plant from American companies, which required congressional approval for a loan.

Follow the money and follow the communists, at the intersection of the two, there you shall find paperwork. Simply searching “Fiat” in the CIA online reading room returned over 100 declassified documents and news articles that had been clipped from papers and scanned in. Records of Gianni Agnelli attending a glamorous party in New York City. A list of known communists and sympathizers that the CIA had advised Fiat to suspend from a de Havilland Vampire airplane project in 1951. Even a transcript of a “remote viewing session” from Project Star Gate. If you had what was probably a white Fiat 132 on Milan plates with damage to the rear left at a farm near some mountains in the winter of 1982, the CIA would like to have a word with you.

Woven in among all the silly stuff was document after document covering various aspects of the “Fiat Deal.”

The Soviets And Fiat Did, Indeed, Make A Deal

Where to start? It all goes back to the Soviet Five-Year Plan for 1966-1970, when the Soviet Union decided to set the goal of producing at least 700,000 passenger cars by 1970, with 600,000 of these to be built in a single factory. In 1965, they produced a mere 201,000 vehicles, just 4,000 cars per million people. Most of these were for “official use,” and approximately one-fifth were out of service at any given time while awaiting repairs. At this time, there were only 19 repair shops and 105 gas stations in all of Moscow, a city of over 7 million people.

This was quite a change as previously both Stalin and Kruschev had wilfully neglected the automobile industry, with Kruschev in particular calling it a “weakness of capitalism.” According to a CIA report entitled “The Fiat-Soviet Auto Plant and Communist Economic Reforms,” they instead focused on developing rail for transportation across the vast expanses of wilderness, and an assortment of buses, trams, taxis, and even car rentals for local transportation. However, this system was a bit of a failure, and coupled with the need to absorb the excess purchasing power of “everyday” comrades, i.e. bureaucrats and the aspirational upper middle class, building more private automobiles would be needed. Fiat had already been discussing building trucks and tractors within the Soviet Union since 1962, so it was natural to turn to them. In his book “Cars For Comrades,” Lewis Siegelbaum walks us through the history of Tolyatti.

Over a thousand buildings and the residents of the town of Stavropol had recently been moved to make way for the creation of the “Zhiguli Sea,” and the newly moved town was renamed for Italy’s longest serving secretary of their Communist party, Palmiro Togliatti, who had been helping with the negotiations up until his death in 1964. It wasn’t uncommon at the time for new towns and cities to be named for foreign communist leaders, as it was a way of showing that party ideology was spreading outside of the country.

Officially, a competition to be home to the new plant was opened to over 100 cities, but a combination of convenient location, transport links, and plentiful local labor allowed Tolyatti to become the home of AvtoVAZ, soon to become Russia’s equivalent of Detroit or Turin.

The same CIA report notes the Russians knew building a massive auto plant from scratch was outside of the scope of local abilities, so Fiat would be in charge of essentially everything, but Fiat also knew that the Russians could not produce the quality of equipment needed. Fiat plants were already full of American-made tooling, and they wanted to buy approximately $50 million dollars (nearly $500 million in 2025 dollars) worth of foundry equipment and machines for the production of engines, bodies, and other assorted parts. To do this, Fiat had to explain to the US Export-Import Bank (commonly called EXIM Bank) that none of this could be used by the Russians for military purposes and gently work a deal to get loans for the equipment paid to the Italian IMI Bank so there was no direct business between Americans and Russians.

All of this financial ballet was subject to debate in Congress, which ended up in several newspapers, including the New York Times, Newsweek, and The Washington Post. This is likely how the American public became aware of Fiat making very large deals with “the enemy” in the Cold War.

For their part, American tool manufacturers were generally pretty open to the deal. In “Cars For Comrades” Irving Peachey of Gleason Works says: “ this is just a pure business deal as far as we’re concerned. We have competitors overseas, if we don’t supply the Russians, they will.” The idea of American companies selling their products to the Russians in a roundabout way not only seemed like a good way to make a bit of money in an untapped market, but also a way to potentially inject a taste of capitalism into a planned economy. After all, if an American machine tool manufacturer could get their products into Russia through Fiat, what was to stop other companies from using the same technique in ways fitting for their industry?

According to a CIA intelligence memorandum from July 1972, the deal between Fiat and the Russians was structured to have an unusually low interest rate of 5.6%. The Russians managed to score this because Fiat wasn’t the only company they were flirting with. On the side, they had been chatting with Renault about getting assistance to upgrade the Moskvitch factory, and they made sure Fiat knew this. Thus, Fiat agreed to uncommonly favorable terms on an eleven-year initial deal. Overall, building the factory went pretty smooth, or about as smooth as it was possible to go in 1960s Russia, with the first car rolling off the line only six months late. The main factory may have gone up quickly, but the foundry to cast the needed parts lagged behind, only becoming operational by 1971, but was limited by casting boxes ordered from Poland that hadn’t been delivered. AvtoVAZ struggled to make enough parts for their own cars, let alone have the capacity to help Fiat with anything..

“Cars for Comrades” again paints an interesting portrait of life in Tolyatti as an early AvtoVAZ worker. They needed an immense workforce of 130,000 people, and while the local area had more workers available than most, there was still a shortage, and worse, a shortage of homes for the workers. The entire town was planned with living spaces of about 8-9 square meters per person. Most of the workers were quite young, with an average age of just twenty-six, which meant workers rapidly started families, causing a severe shortage of daycare and school services. These apartments were owned by AvtoVAZ, so any difficulties at work could threaten one’s ability to have a home, but any issues at home would also be dealt with by the company. However, because the factory needed so many workers, punishments for misdeeds were typically light and because city life was so desirable compared to the agricultural communes, scams and sham marriages were not unheard of.

What Was In It For Fiat?

So, what did Fiat stand to gain in all of this? As it turns out, not a whole lot. When Gianni Agnelli spoke of the deal to the New York Times in 1972, he claimed “we did not make any money on the deal, but there were a lot of other benefits…we have trained a lot of our engineers in the construction of a plant of such magnitude under very difficult conditions.” Ever the mix of quasi-statesman and salesman, he continued, “What we like best of all, however, is the fact that a very large number of cars rolling in Russia are Fiats.” In financial terms, Fiat made a measly $50 million dollars off the deal. However, Agnelli was well aware that he wasn’t the only salesman of small cars on the block. Fiat had worked hard to protect their own market by encouraging the Italian government (and it can’t really be understated how much influence Fiat had on the Italian government in the 60’s and 70’s) to maintain a strict voluntary export restraint on Japanese automobiles, limiting imports and exports to only 2,000 units per year, as noted in “Effects of European VERs on Japanese Autos” by Jaime de Melo and Patrick Messerlin, a working paper for The World Bank in 1988. Fiat’s presence in a planned economy meant they could claim the territory for themselves and block entry to Japanese automakers.

Fiat also worked hard to protect its domestic material supplies from imports. Textiles, chemicals, ferrous and non-ferrous metals, and machinery and transport equipment were all commodity groups with some of the highest numbers of import quota restrictions, and those restrictions were tightest on “centrally planned economies,” according to The World Bank.

In 1977, there were 139 separate restricted categories from centrally planned economies versus just 34 categories for Japan, the next most restricted exporter. Fiat and other fully or partially Agnelli-controlled companies all worked with these protected commodities. They also had the benefit of rather efficient steel production right in their Northern Italian backyard. The area around Brescia had about 80 “mini mills,” small steel production plants that recycled scrap into usable bars, rods, and sheets. By 1982, the US Department of Commerce launched an investigation into subsidization and dumping of steel by European countries and found the state-owned steel firm Italsider was subsidized at a whopping 26% and the Falck Steel company (the largest in Italy a decade earlier) was subsidized at 17%, among the highest of the companies called out. Italy had plenty of their own steel, did not want anybody else’s, and especially did not want Soviet steel.

Then Why All The Iron Oxide?

So why did the cars rust so badly? Was it really that bad in the first place? Well, as the lovely Jason Torchinsky pointed out in the case of the Lancia Beta, some of it was down to design. I happen to own a relatively early build Lancia Beta Scorpion and will gleefully defend the mostly rust-free honor of my car. Some Betas were built with a U-shaped channel in the subframe at the rear of the engine that could accumulate water and dirt, which could certainly lead to rust. Some unfortunate British TV coverage really didn’t help, and Lancia never recovered in the UK market, despite adding an anti-corrosion warranty.

Much of the problem was due to labor and quality issues that afflicted the entire Italian automotive industry at the time. Strikes occurred at the Fiat and Lancia plants frequently and they shared this problem with Alfa Romeo, which was not owned by Fiat at the time. Here, we can look to research done by Italian automotive historian Matteo Licata, who points to improvements in primer coatings and plastic sealants as well as better industrial relations as the turning point for the similarly rust-prone Alfasud.

Starting in 1968, the “Hot Autumn” strikes seriously crippled the Fiat Mirafiori plant. (LINK: ) What could start out as a handful of workers walking off in a wildcat strike could balloon into thousands of workers demanding raises by the time they reached the head offices. This eventually spiraled into three executives being murdered by 1979, nineteen others kneecapped or wounded, and eighteen cases of arson at Fiat factories.

Downing tools in the middle of the work day left parts in the open, untreated, or poorly installed. Quality could suffer intensely as a result of discontent and poor training. A builder of Fiat X1/9 race cars I spoke with recounted removing seam sealer and undercoating from a vehicle and finding one side had fourteen pounds and the other just four. Many body panels were poorly spot-welded and edge seams left unsealed, allowing for moisture intrusion. And then there’s the simple fact that cars just rusted more in that era. Roads were more heavily salted, and as David Tracy has found out, cars of a certain age from salted regions suffer far more than those from the unsalted lands.

In the end, Russian steel was most likely not a culprit at all for Italian rust. Unfortunately, the blame can more accurately be placed on iffy workmanship and a particularly long patch of difficult worker relations, combined with simply less emphasis on rustproofing. That’s not to say you should take a pass on the Italian heap of your dreams. Most of them that still survive have been sorted out over the last fifty years or so. You’ll also get to enjoy dozens of raised eyebrows at car events and can now pass along the facts of 100% pure Italian rust.

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