(FORTUNE Magazine) – WESTERN INVESTORS have poured some $15 billion into Eastern Europe in the five years since the Berlin Wall came down, but not everyone is happy. General Electric had to put an additional $400 million into its Hungarian light bulb maker, Tungsram, before it saw a dime of profit. Dow pulled out of a $200 million deal in the Czech Republic after accusing the Czechs of grossly overstating assets. Negotiators from Germany's industrial giant Siemens have little to show for their marathon 28-month negotiating session with the heavy- engineering arm of Skoda, the Czech industrial group. One Western company stands out, both for the breadth of its commitment and for its proven ability to run businesses in Eastern Europe. When Swedish robotics maker ASEA merged with Switzerland's stodgy Brown Boveri power engineering group in 1988, few could have dreamed of the immense opportunities that would shortly appear in the East. When the Iron Curtain parted a year later, CEO Percy Barnevik saw a one-time chance to expand his $28-billion-a- year conglomerate.

Now, ABB Asea Brown Boveri is the most important investor in the former Warsaw Pact countries. ABB has even opened sales offices in such backwaters as Albania and Bulgaria. Through shrewdly managed acquisitions, it controls 58 companies with 20,000 employees in 16 Eastern countries and is on the prowl for more. Siemens has an equal number of joint ventures, but it operates in four fewer countries. United Technologies' Otis Elevator division is another major investor. It has 14,000 employees in Russia and is hoping to refurbish, | or replace, the country's creaky elevators. Most of ABB's companies -- from turbine makers in Poland to a full-scale power plant assembler in Russia -- have already been integrated into the parent company's global production network. The resulting economies of scale have helped ABB cut prices on some major products by as much as 50%. And the company is well positioned in a part of the world where most of what it makes -- heavy, infrastructure-based power engineering components and devices -- will be in great demand for years. ABB can use the boost. Despite aggressive cost cutting, its performance has disappointed many analysts in recent years. Sales slumped to $28.3 billion last year from a record $29.6 billion the year before. Profits have fallen too -- to a disappointing $68 million, largely because of a $569 million one-time charge in connection with the closing of 15 factories in Europe and the U.S. Nor has the company attained the 10% operating margins and 25% return on assets that Barnevik set as a goal in 1990. Still, Barnevik says he is confident that ABB's long-range strategy is on the right track. Since ABB is so dependent on infrastructure projects, recession in Europe and Japan has hurt the company more than others. Also, he argues that ABB has been investing heavily in the past few years in order to be competitive when the global economy improves. Barnevik's dramatic push into Eastern Europe is a logical extension of his well-known take-no-prisoners approach to restoring competitiveness to Europe's bloated, high-wage industry. Says Dariusz Karwacki, 31, general director of ABB Dolmel in Poland: ''The other companies have focused mostly on the market opportunities here. Only Barnevik has seen production potential here too.'' In this, Barnevik may be unique. Europe's deep competitive crisis has cut sharply into the willingness of its companies to invest in the East. Some have made small investments or moved the manufacture of some simple components east, but most companies have been wary. Given the region's astonishing competitive edge -- wages in Eastern Europe are, on average, about 6% of Germany's -- their investment has been small and tentative. Partly, European companies have been reluctant to trigger the massive layoffs that would result if they moved a lot of production to neighboring low-wage countries. All told, Barnevik has cut 47,000 jobs in the U.S. and Europe -- roughly twice as many as he has created in the East. But he claims that by failing to invest in Eastern Europe, the West is harming itself more than it is helping to protect jobs. Says he: ''If we become more competitive in Europe by using the opportunities that the East offers us, we can be stronger in Asia.'' Barnevik likes to say that his biggest investment in Eastern Europe has been less the cash paid up front for these companies than the amount of management time he and his top aides have put into revamping the state-owned enterprises he took over. He has a point. Though he won't reveal figures, estimates put ABB's total investment at around $300 million -- peanuts considering all the assets it acquired. Barnevik follows a simple turnaround formula. First, he rarely buys whole companies, preferring potentially profitable divisions among the detritus of the huge, usually bankrupt, socialist enterprises. Once the jewels are identified, ABB negotiators begin devising a business plan while still talking terms. Then they look for local managers. Often this means bypassing older command bureaucrats in favor of younger people, whom ABB finds more adaptable -- and hungrier. ABB has already trained more than 5,800 Eastern Europeans. ABB refuses to accept a minority position. Once in control, it divides the company into profit centers, installs a Western accounting system, starts English lessons for middle managers so they can communicate with headquarters in Zurich (English is ABB's official language), and puts in new testing devices to help raise quality to Western levels. Says Barnevik: ''My experience is that within two years you can restore a typical Eastern European company to profitability. It is not a ten-year proposition. It is a two-year proposition. But you have to believe in the people.'' Tactics like these have helped ABB avoid the pitfalls of others. Says Barnevik: ''You have to move fast but be very selective. And don't overpromise on investment.'' Adds Eberhard von Koerber, the feisty head of ABB's recently reorganized European division, which unites the growing eastern empire with the original Brown Boveri and ASEA holdings: ''These markets will develop because they have to develop. Companies like us have to be there.'' ABB'S BIGGEST investment is in Poland, where it controls four of the country's five makers of power-generating equipment. After four years, ABB's Polish operations now generate nearly $220 million of revenues and make a small profit on sales within Poland, as well as on exports. ABB is selling Polish-made gas turbines and low-pressure turbine rotors in the U.S. Equally important, ABB is able to produce high-voltage switching gear, turbine blades, rotors, and other products for use in the power plant equipment it assembles in Germany and Switzerland -- at about half the cost of Western European factories. Right behind Poland in importance to ABB is the Czech Republic, where the company has aggressively expanded in recent months. Already, Brno (pop. 385,000), the capital of the Czech state of Moravia, has become something of an ABB company town. Three joint ventures producing turbines and medium- voltage switching gear have 5,700 employees among them. Across town, more than 200 engineers are busy at ABB Lummus Chemoproject, a joint venture in which Czech designers draw specifications for components of petrochemical plants. ABB officials say that the engineers' work is excellent and that similar advanced engineering would cost roughly three times as much to do in the West. Now that ABB has a major presence in Poland and the Czech Republic, it has begun moving even farther east. In the past 12 months it has added four joint ventures to its eight existing companies in Russia, and it continues to expand despite recent political turmoil. ''We can't wait for the region to stabilize,'' says Barnevik. ''We want to create a home market there now.'' Barnevik insists that the outlook for Russia is rosy -- in the long term. He has authorized country manager Maxwell Asgari, 56, an Armenian-born American who once ran Combustion Engineering's Russian ventures, to assemble a chain of production facilities capable of putting together complete power plants. Among Asgari's recent additions are Nevskii Zavod, a 1,200-employee full-scale power plant maker in St. Petersburg, where final assembly will be done, and an engineering-based joint venture with Saturn, a government military design bureau that produced high-performance jet engines for the Sukhoi-27, a fighter plane. With these acquisitions -- and perhaps more like it -- Barnevik vows that Russia will be one of ABB's four or five largest home markets within ten years. INCREASED REVENUES from acquisitions have helped ABB double its R&D since 1988, to $2.2 billion. The payoff: Last year nearly half of the company's $29.4 billion in orders came from products introduced since 1990. The East has done its share of new-product development. ABB is producing more efficient large gas turbines now because of gas- and liquid-dynamics technology developed with Uniturbo, a Russian joint venture. There are already remarkable displays of loyalty among ABB's employees in the East. Ewa Nowak, 33, an ABB-trained controller at Dolmel -- the Polish generator maker that ABB saved from bankruptcy four years ago -- says that she has turned down lucrative offers from other Western firms operating in Poland because she appreciates ABB's long-term commitment. By contrast, ABB's Westerners have been less shy about cashing in their chips. ABB executives, it seems, have become headhunters' delights, much as General Electric alums are in the U.S. One of the architects of ABB's Eastern policy, Swiss-born Barbara Kux, 40, is now heading Nestle's push into Eastern Europe. Gerhard Schulmeyer, who headed U.S. operations, will become CEO of Siemens-Nixdorf, the struggling German computer company. Now that the world economy is turning up, Barnevik wants to switch from cutting costs and people to growth. Last fall he summoned 400 top managers to Norway for a conference. ''The period of restructuring is over,'' he announced. ''This year, the message is simple: Go for growth.'' The Eastern European investments are meant to play a major part in that push. For a moment, set aside your image of Percy the hatchet man. Like it or not, he is building a company -- not just paring one down. The only difference is that the new company will have a geographic center about 1,000 kilometers east of the current corporate headquarters in Zurich. And it will be far more competitive as a result.