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The eBearing News
February 14, 2005
IMF Cracks Down on Romania;
Rulmentul Brasov Targeted
copyright © 2005 eBearing Inc.
Following a two week mission, the International Monetary Fund (IMF) reached agreements with
the government of Romania on a wide range of strict governmental and fiscal reforms.
Part of that package is an agreement that the state privatization agency (State Assets
Resolution Authority) will privatize or close down the three largest money-losing companies remaining
under its jurisdiction. Those are electrical equipment maker Electroputere Craiova, tractor
plant Tractorul Brasov, and bearing manufacturer S.C. Rulmentul SA Brasov (RBR).
Under the agreement, the three must either be privatized or closed down by the end of 2005.
Rulmentul Brasov was on the IMF's agreed privatization list in 2004, but was not privatized.
While the Minister of State recently noted there had been interest in Electroputere and
Tractorul, he made no reference to any active outside interest in Rulmentul Brasov.
The most recent interest in RBR was from Ortadogu Rulman Sanayi (ORS, Turkey).
However, ORS walked away from its USD $3.9 million offer after its due diligence found RBR sitting on massive
stocks of what it termed worthless inventory, supporting an impossibly large workforce,
unpaid bills and wages, and after RBR's workforce
repeatedly walked out in protest over Ortadogu's interest in the company. INA (Germany) was also
encouraged to acquire Rulmentul Brasov rather than build a new plant nearby, but declined.
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.
A portion of Rulmentul Brasov's stock began public trading in 1994, and the company was nominally
privatized in 2000. It is publicly traded (BSE symbol: RBR), but 51% owned by the state.
Its continued existence has been guaranteed only by massive government debt write-offs,
subsidies and captive sales to other state-run customers.
Actual financial and operating information is difficult to obtain for RBR.
As examples, the Romanian government has claimed employment was 5,200 at the same time RBR
reported it stood at 6,600. Similarly, the government reported RBR returned unspecified "massive"
profits on bearing sales of over USD $13 billion, while RBR itself reported the government wrote
off loans to it as uncollectible, then claimed profitability on sales of USD $4 million, but only
by ignoring its debt.
For many years, RBR had an ongoing technical relationship with Koyo-Seiko Co. Ltd. (Japan),
which included a late-1990s rework of some of its manufacturing systems. Approximately USD $12.5 million
of bearing production machinery was acquired from Koyo in 2000.
Although RBR has been through some restructuring -- including massive
employment reductions to around 3,000 today -- its continuing problems
were enough to bring the unwanted IMF attention.
Rulmentul Brasov is also facing competition from other former state-run bearing plants in Romania now
operating as divisions of some of the world's largest bearing companies. Koyo Seiko owns the former
Rulmentul Alexandria plant in Alexandria, and Timken owns the former S.C. Rulmenti Grei plant in Ploiesti.
Both are updated and have received extensive investment in plant and equipment. And INA is still
building out a massive € 180 million plain and linear bearing factory in Brasov.
To meet IMF demands, Romania will also privatize two major banks and two key electricity distribution
organizations by April 15. Two other electricity distributors must be privatized by September 1. The State
Assets Resolution Authority must also privatize or close 80 other small companies by the end of 2005,
at the rate of at least 20 per quarter. Over 3,000km of railroad must be given up to private operators,
and some of the overemployment in state-run mining concerns must be addressed by laying off at least
6,000 miners by the end of 2005.
Taxes will be raised to better cover government spending, including doubling non-residential income tax,
raising real estate profit taxes to 16%, a ten-fold increase in interest income and capital gains
taxes, raising excise taxes on oil, tobacco, spirits, electricity and natural gas, to a target
of 16%. Romanian personal and business income taxes will remain at their flat 16% implemented
on January 1, 2005.
Government workers will not get raises in 2005, since they were given excessive raises in 2004 which
violated the IMF agreement.
Massive government subsidy programs to farming and mining interests must also be cut.
All of the changes come as the Romanian economy -- out of control with runaway deficits, inflation
and government subsidies -- struggles to right itself under the new government of
Prime Minister Calin Popescu Tariceanu.
Romania violated so many IMF covenants that its economy was collapsing. In 2005, the government has
agreed to target 7% inflation, down from over 9% in 2004 and 30% or more in previous years. And
"visible steps" must be taken to address widespread corruption in the government and its state-run
programs and businesses.
The IMF target for Romania's fiscal 2005 deficit is less than half what it was in 2004, which in itself
forced many of the Draconian measures.
Romania's ultimate goal -- to join the European Union by 2007 -- is also a key factor in its
recent agreement to begin abiding by IMF rules. While several EU members openly doubt Romania will meet
its financial requirements for soundness, inflation, deficit control and other rules by 2007, they
applaud the new conviction to take strong steps toward more responsible policies and a market economy.
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- by Bruce A. Carr
from individual research,
tips and commercial sources.
Unauthorized reproduction is prohibited.
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eBearing.com ... for everything that moves™
Entire contents Copyright 1999-2008, eBearing Inc. All rights reserved.
eBearing.com and "... for everything that moves" are registered
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eBearing.com ... for everything that moves™
Entire contents Copyright © 1999-2008, eBearing Inc. All rights reserved.
eBearing.com and "... for everything that moves" are registered trademarks of eBearing Inc.
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