ECONOMY

Romania tries to sell obsolete truck enterprise at any price

BRASOV, Romania (AP) – Roman SA made just a few hundred trucks last year, had debts of $44 million and its most valuable asset was a 30-year-old hydraulic press that it couldn’t afford to run. Make an offer – any offer – and it could be yours. That’s how desperate Romania’s government is to get rid of the state-run truckmaker. After 12 years of privatization in the former communist country, nearly all the best opportunities are gone. The last batch of good companies, including oil company SNP Petrom SA, power distributors and BCR bank, will go on the block in the next year. Left behind will be a few companies like Roman, which are a tremendous drain on Romania’s economy, holding back growth and threatening the country’s otherwise good progress and credit rating. It’s nearing time for the government to either sell them or shut them down. «If Romania continues on the current path of improving macroeconomic fundamentals… and more importantly, if we see something on privatization, ratings should go up,» said Kavin Daly, a director of S&P at a recent seminar in Bucharest. Roman is a pretty typical example of what’s left to privatize in Romania. The company, located in the city of Brasov, some 190 kilometers (120 miles) north of Bucharest, only produced 405 trucks last year. It has a work force of 7,400. While other Romanian companies restructured in the early 1990s to be privatized, Roman limped along using an archaic industrial model. In addition to its truck assembly line, Roman’s other departments dabbled in everything from transport to operating a heating plant. The company even owns an entertainment hall that hosts dances, parties and concerts and once was the place to go for Communist Party meetings. Roman’s equipment dates back to the 1970s and includes a massive hydraulic press that – in its day – could turn out an entire truck chassis in the blink of an eye. Now, the communist white elephant costs too much to run for a company that can’t even afford to pay its utility bill. Walk through the plant with Roman employees and you immediately understand why privatization of the company isn’t going smoothly. It’s very hard to change a mind-set, and many workers still live in the past. «You know, not even DAF Trucks (of the Netherlands) or MAN AG (of Germany) had equipment of this level,» says senior management adviser Ion Calin proudly, pointing to the massive chassis-building machine. Roman was on the block once last year but in its poor condition, didn’t attract any attention. Since the start of this year, it has been run by a a government-appointed administrator, who’s looking for ways to sell the company. Otherwise, it will likely be shut down. The need to do something about companies like Roman is clear. Roman’s debts alone nearly cut in half 2002 privatization revenues of $84.8 million. Progress of a $380-million International Monetary Fund loan agreement is closely watched by investors to see how successful reforms have been in Romania. The IMF won’t release the latest tranche of the loan unless the government lays off 24,000 workers at state-run companies this year. Layoffs are coming to Roman. The government told management to cut loose 3,000 of its 7,400 staff by June. The response to that announcement underscores the problems the government faces as it makes some last, hard decisions about privatization. Roman workers took to the streets last month, joining up with employees of nearby Tractorul UTB SA, a maker of farm equipment which was also ordered to shed half its 6,700 work force. They blocked traffic for several days in downtown Brasov. «There is a huge pressure from trade unions,» says Emil Hategan, a general director of the country’s privatization agency. «They think the investor should be a knight coming in on a white horse, coming just to pay salaries,» he said, accusing unions of hampering efforts to lure investors. Social unrest ratchets up pressure on a government that plans to seek a new term in general elections next year. In previous years, protests or strikes were enough to make the government cave. Not this time, says the frustrated government, which is tired of handing out charity to companies that don’t want to change their ways. «The idea of producing trucks as in 1990 is a utopia,» said Privatization Minister Ovidiu Musetescu. «We have to be pragmatic. We shouldn’t think that privatization means restoring socialist society,» he adds. Labor strife aside, Roman management still believes the company can be turned around and produce a lot of trucks under new management. «Honestly, we need just a partner able to bring us some market and financing for production,» said Carol Rugacs, Roman’s general manager. But the government has other ideas. In a last-ditch effort to sell Roman, the government privatization agency split the company into several independent units last fall. Musetescu wants Roman out of the truckmaking business. He’d like to turn its array of buildings into an industrial park, selling them to investors who want to start their own production there.