Rulmentul Brasov, Romania's state-run bearing manufacturer and the most troubled of all the state-run businesses, is being shut down and assets liquidated. The Bucharest Stock Exchange removed it from listings as of March 29 in anticipation of the decision.

The company manufactured bearings under the RBR and URB brands.

More than 2,240 workers will lose their jobs, but receive a relatively generous compensation package by Romanian standards. They will each receive payment equivalent to twice the average salary in Romania, and a continuing severance up to two years, depending upon the worker's position and length of service.

Rulmentul Brasov has accumulated a staggering debt load, despite regular debt writeoffs and forgiveness. The company's sales dropped 10% in 2006, to RoN114.6 million (USD $46 million), but turning in losses of RoN40.6 million ($16.5 million). Despite massive writeoffs, accumulated government-backed debt once again tops RoN250 million ($95 million).

Adding more pressure, Romania has been in violation of both European Commission and International Monetary Fund directives to close its worst state-supported businesses. The EC and IMF both instructed that the worst of the worst, Rulmentul Brasov, must be sold or shuttered by the end of 2005. Romanian authorities managed to skirt the edict and avoid an unemployment jump, but as a result now faces sanctions at the end of 2007.

The shutdown was justified by the Romanian State Assets Recovery Authority (AVAS) as coming after an honest evaluation of all state-run businesses in its privatization portfolio. Only 10% rated better than bankruptcy, and a few more than that may have potential for interest from outside investors.

The closing also comes as a blow to the Brasov region, home also to Tractorul, the state-run tractor maker being shut down and putting another 1,950 workers on the street.

In early February, workers from both Rulmentul and Tractorul walked off the job to both protest the likely decision and press for a better severance package if they were to be closed. Prime Minister Popescu Tariceanu said at the time, "there is no solution" for the troubled companies.

Founded in 1949, Rulmentul SA Brasov was Romania's largest bearing manufacturing facility. Under the RBR and URB (Uzina Rulmentul Brasov) brands, the company manufactured 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.

Since 1992, more than 10,000 state-run companies have been privatized, and 9,000 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 EU and IMF deadline of December 2007.

Deeply rooted problems make Rulmentul Brasov the worst and most troubled of the remaining state-run businesses. It has attracted little or no serious investor interest in several years, and the workforce has a history of instability and walkouts, protesting whenever a buyer would show any interest.

Several knowledgeable observers have told eBearing the onerous terms for taking over Rulmentul Brasov were just part of the problem. They 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. Other problems centered on "hopelessly antiquated" facilities, with rampant safety and environmental issues, a poorly trained and demotivated workforce, unhappy customers, lack of guaranteed government sales contracts, and myriad other smaller issues.

In 2005, the IMF and EC adding pressure on Romanian authorities, specifically naming Rulmentul Brasov as the worst of the money-losing businesses which must be closed or sold.

The EU found that Romania's massive and continuing financial support package for Rulmentul Brasov put the country in violation of several EU trade and government support covenants, and the IMF has taken the same position. Although the IMF declared Rulmentul Brasov must be sold by the end of 2005 in order to avoid sanctions, the country made some passing efforts and no sanctions were ever enacted.

The Romanian government has put Rulmentul Brasov up for sale several times in recent years, then taken it back off the market only to put it up again. This past August 2006, it was once again taken off the market, apparently for good.

eBearing has been tracking the developments in a series of articles:

2005 article: IMF cracks down on Romania, targets Rulmentul Brasov

2005 article: Rulmentul Brasov acquisition terms and conditions set

2005 article: Rulmentul Brasov attracts two bidders

2006 article: Romania rejects last remaining bid for Rulmentul Brasov

2006 article: Rulmentul Brasov privatization effort put on hold

2007 article: Rulmentul Brasov likely to close; workers state walkout