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Vihorlat investment: It's about timeDutch buyer arrives as locals blame government for ignoring the east
The Vihorlat Snina factory employed 6,500 people during communism.... photo: Chris Togneri
17 Dec 2001 Chris Togneri Business
The sale, which occurred in the fifth round of a year-old bankruptcy tender, was reported to have brought Vihorlat creditors Sk220 million ($4.6 million). Local residents and town representatives said they hoped the change in ownership would mark the end of a long series of layoffs and the beginning of an economic upturn in the poor - and neglected - Snina region.
"The Vihorlat factory is very important to Snina and the whole region, therefore this investment is crucial for us," said an assistant to the town mayor, Štefan Milovčík, who refused to give her name.
"Before the 1989 revolution Vihorlat employed 6,500 people. But because of the firm's financial problems, today only about 1,000 people work there. Vihorlat was the biggest employer in the region by far, and still has the capacity to be the biggest employer, so of course we are very interested in the factory's health.
"It probably won't be able to employ so many people again, but even if it won't be what it was, at least it will be something." she said.
Vihorlat Snina began production in the 1950's. Originally an agricultural machinery factory, it later produced pressure casting machines, hydraulic motors, cranes and military ammunition. But with the collapse of the socialist market in 1989, the factory fell into financial disarray and began laying off employees.
Problems continued for the factory in 1992, when Vihorlat Snina was created as a separate entity under its mother company VSŽ Košice. The factory recorded losses every year thereafter, except in 1997. Vihorlat recorded a turnover of Sk700 million in 1998, but needed sales of Sk1 billion just to break even.
Following the entry of US Steel into VSŽ in 2000, Vihorlat was left in the so-called "old VSŽ", a group of money-losing firms US Steel did not want from the original VSŽ fold.
The Košice regional court declared bankruptcy on Vihorlat on October 30, 2000, by which time the workforce had been reduced to 1,700. When VH Snina bought out the factory November 30, employment stood at 1,350, with the new owners announcing cuts of an additional 390 jobs.
Although the new owners of Vihorlat Snina were unavailable for comment following their purchase of the factory, they have promised to begin rebuilding the deflated workforce.
"I think that Vihorlat, over the course of four to five years, could employ probably 1,500 people," said Zoltán Berghauer, the head of Hubertus, for the daily Sme.
Berghauer added that the main tasks facing the factory were reducing its bloated administrative staff, increasing labour productivity and finding new foreign markets for Vihorlat's goods.
Goods produced by the factory, as of October 29, 2000, went to domestic markets (33%), the Czech Republic (11%), other markets abroad (40%), and VSZ Košice (16%).
Hubertus is a travel agency with a stake in copper producer Kovohuty Krompachy, in which ex-Economy Minister Ľudovít Černák once held a stake.
Despite Berghauer's optimism regarding Vihorlat's future, Snina's long-suffering locals seemed resentful of the country's leaders for allowing the factory to fall into such disrepair.
They welcomed promises that the firm would discontinue layoffs.
"It's about time somebody helped us. The situation in Snina has become worse every year since the revolution, yet those Bolsheviks in Bratislava don't do a bloody thing to help us," said Peter, 42, who was standing with his wife on the town's main square December 11.
"It's sad that when we need help, we have to get it from the Dutch. Where are Slovak politicians when we need them?" he said.
The mayor's assistant added: "I don't care who the investors are. If they can give us some more jobs and help improve the financial situation in this city, it doesn't matter one bit to me where they come from."
In a restaurant on the main square, other Snina natives also said they were pleased with the potential turnaround at Vihorlat, yet irritated that it had taken so long to happen.
"Snina used to be one of the most important cities in Slovakia, now it's nothing. They just let us slowly get poorer and poorer out here because it's the east, and nobody in Bratislava cares what happens to us sedlaci [equivalent to 'red-neck' or 'hick'] out in the east," said Marek, 57.
"The investment means more jobs, it means that more people can work. Of course this is good," added Sylvia, 30.
While the investment should mean more jobs, the new ownership will be watching factory employees closely. Production rates at the plant are low compared to other countries, a disturbing trend Berghauer says must change.
"Production per worker per year in the Czech Republic at a similar factory, for example, is roughly Sk800,000 ($16,670). But here it's Sk300,000. This is also an answer to the question of why the old Vihorlat could not function," Berghauser said.
Unemployed locals - like Ivan, 39, who used to work for Vihorlat but was laid off in the mid 1990s - say they just need a chance to show what they can do.
"Give me a job again and I'll work hard. I understand what having work means now. I also understand how hard life is without a job," he said.More from Business
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