Top management at the giant VSŽ steel works accused the Slovak government on November 17 of using a financial crisis at the company to force changes to the firm's leadership.
Julius Rezeš, company president and chairman of the VSŽ board of directors, said that at a November 10 meeting with VSŽ leadership, cabinet officials had produced one demand - changes to the board of directors. The meeting had been called to discuss solutions, including a state loan guarantee, to a liquidity shortage at Slovakia's largest industrial company. On November 9, VSŽ had failed to repay a $35 million syndicated loan arranged by Merrill Lynch.
"We asked cabinet officials whom they would propose as new members of the supervisory board. They told us to submit a long list of names that we could later jointly discuss. In addition to this, the cabinet required the resignation of the current board of directors by 12:00 noon the next day," said Rezeš in an interview with the company-owned daily newspaper Národná Obroda.
Government spokesman Martin Lengyel said on November 16 that the cabinet had wanted only to help solve VSŽ's problems "without threatening employment and production." As a result of their refusal to accept the assistance of the government, Lengyel said, VSŽ chief executives now bore "full responsibility" for the future development of the company.
Rezeš, for his part, accused the cabinet of baiting VSŽ management, which has personal ties to the HZDS party of former Premier Vladimír Mečiar.
Rezeš also argued that major changes to management and corporate strategy could only be taken at a VSŽ shareholders meeting, which according to the Slovak commercial code, could not be held until November 23. The government, he said, was using the VSŽ crisis to score political points.
"The cabinet was hiding behind a declaration that it wants to keep employment [figures stable] and VSŽ running although it is aware that banks are demanding radical measures from us concerning employment," complained Rezeš.
The Merrill Lynch decision to recall the loan before its 7 year term was only the latest in a series of misfortunes that have rocked VSŽ, which, according to Economy Minister Ľudovít Černák, produces 10% of Slovak GDP and 22% of the country's exports. A plunge in steel prices on world markets, as well as ill-fated decisions to invest in non-core activities, have left the company predicting a loss for 1998.
According to analysts, the Merrill Lynch decision is associated with a general trend of large international banks to reduce credit exposure on emerging markets. But according to Rezeš, the cabinet decision was associated with its general desire to hasten the downfall of Mečiar-era business tycoons. "The cabinet attitude attests to the fact that it is coordinating its steps with our creditors," stated Rezeš.
