Romanian Effort to Privatize Rulmentul Brasov Continues

Romanian Effort to Privatize Rulmentul Brasov Continues Romania's Privatization Authority has had a tough ride and so far it's no-sale for deeply troubled state-owned bearing manufacturer, Rulmentul Brasov. The new PA head, Razvan Orasanu, has taken Rulmentul Brasov off the market for some time to pause and regroup. "This was suspended because we did not have enough interest in the terms and conditions given in the task book. We are speaking to the Competition Council, and our own experts on state aid, to see the limit we are aiming to reach." In February, the Privatization Authority announced it had rejected the only recent offer for Rulmentul Brasov, put forward by a consortium of Romanian businesses, "due to the unsatisfactory price and way of request." Before that, the government had rejected other offers for unrelated and seemingly random reasons. Mr. Orasanu, promises change in that regard, transparency, and a stronger push to complete transactions. Founded in 1949, Rulmentul SA Brasov is Romania's largest bearing manufacturing facility. Under the RBR and URB (Uzina Rulmentul Brasov) brands, the company manufactures ball bearings, linear bearings, tapered roller bearings and needle roller bearings. Brand names are difficult to distinguish, however. RBR as a brand is actually registered by Rulmentul Barlad, the bearing factory in Barlad. URB, although it began as the brand for Rulmentul Brasov, eventually became a common brand name available for use by all of Romania's government-run bearing factories. Its location in Brasov, and employing over 2,600 workers, are powerful incentives for the government to keep the bearing plant operating. Essentially, said Mr. Orasanu, Rulmentul Brasov is problematic for AVAS because Brasov is a hard-hit industrial area but a, "key industrial cluster," where many similar low-skill manufacturing jobs and plants are located. Mr. Orasanu commented: "If an industrial cluster goes out of Iasi or Brasov, the whole tissue of the area is affected. We have a duty to keep them operational even if they go into voluntary liquidation. You don't deliberately try and destroy whole industrial areas. What you try to do is have solutions that are market-oriented and that are lenient, but adapted to the region." Since 1992, more than 10,000 state-run companies have been privatized, and 8,000 more are bankrupt. There are approximately 450 remaining in the Privatization Authority's inventory, and it is making a strong push to sell them off by the European Union's deadline of December 2007. Several, deep-seated problems separate Rulmentul Brasov from the other large state-run businesses. With the largest now attracting outside interest and likely to be sold, Rulmentul Brasov will remain on the rolls as the largest and singularly most troubled company in AVAS' inventory. It has attracted little or no serious interest in more than a year, and the workforce has a history of walkouts, protesting against the few buyers ever showing interest. Several knowledgeable observers have told eBearing the onerous terms for taking over Rulmentul Brasov are just part of the problem. The terms require, for example, maintaining the massively bloated workforce rolls, offering benefits packages, paying off accumulated debt, accepting a large amount of worthless finished goods inventory, and other expensive legacy problems. But other issues revolve around "hopelessly antiquated" facilities, with rampant safety and environmental issues, a poorly trained and unmotivated workforce, unhappy customers, lack of guaranteed government sales contracts, and a myriad of other smaller issues. International bearing manufacturers been moving into the increasingly important Romanian market, and even setting up in the Brasov area. But so far they have ignored government pleas to consider taking over Rulmentul Brasov; instead, they simply set up greenfield facilities. INA, for example, now has multiple plants for manufacturing bearings and components in the Brasov area. Adding to the pressure on Romanian authorities, the International Monetary Fund and the European Commission specifically named Rulmentul Brasov as one of the most important money-losing business which must be closed or sold. The EU said Romania's massive continuing financial support package for Rulmentul Brasov puts the country in violation of several EU trade and government support covenants, and the IMF has taken the same position. In fact, the IMF declared Rulmentul Brasov must be sold by the end of 2005 in order to avoid sanctions; it is not clear what actions may be taken since that deadline has come and gone. Mr. Orasanu did not say when Rulmentul Brasov might be put back on the market, nor has there been any comment made as to whether the restrictive purchase terms might be loosened.