Pow-wow. VSŽ top brass Jaroslav Gruber (left), Pavol Miškov (centre, rear), Július Rezeš (right) and Jaroslav Bilík (front) reflect on their fortunes at a shareholders meeting on December 11.
Observers say that the personnel changes will bring much-needed experience to the ranks of VSŽ top management, and will go a long way towards reassuring nervous creditors of the firm's viability.
VSŽ, which during 1997 invested heavily in non-core business like sports teams and the media, defaulted on a $35 million syndicated loan arranged by Merrill Lynch on November 9. Since the default, speculation has been rife that the firm, which accounts for 10% of Slovak GDP, would be unable to meet the demands of its other creditors.
Martin Kabát, an equity analyst with Slávia Capital brokers, said that the personnel changes were vital to the future of the company. "The primary task [of the new management] will now be to save and rehabilitate as much [in the company] as they can, and to seek a partner with strong know-how," he said. Eichler in particular, Kabát argued, was the right choice as president. "He is a well-trained and well-grounded professional, able to help the company."
The personnel changes came three days after a shareholders meeting at which most of the members of the Supervisory Board and the entire Board of Directors resigned. Outgoing executives included Supervisory Board chairman Ján Smerek, who is also a deputy with the HZDS party of former Premier Vladimír Mečiar, as well as VSŽ President Július Rezeš.
Alexander Rezeš, father of Július and a former Transport Minister in the Mečiar government, was elected as the new head of the Supervisory Board. Peter Huňor, a state official from the FNM privatisation agency, was also elected to the new board.
The December 11 meeting also changed the power relations between the boards, removing the right of the Supervisory Board to approve all decisions by the Board of Directors and increasing the powers of the latter board as well as those of the president.
Kabát explained that the changes had made a virtual eunuch of the once-powerful Rezeš. "He, as a shareholder, has the right to occupy the post [of Supervisory Board director], but now, compared to his previous powers, he is at the same level as any other shareholder."
Jaroslav Grúber, currently the boss of the trade union joint-stock company Hutník, which owns a 10.2% stake in VSŽ Holding, is another member of the VSŽ Supervisory Board re-elected to his post on December 11.
Grúber said that despite the fact that former Supervisory Board members had been re-elected to the new board, he didn't expect any further conflicts with creditor banks. "The banks have never had reservations against the VSŽ Supervisory Board, they were just critical of the Board of Directors," he said.
Grúber added that the new members of VSŽ Holding's top bodies would hold office for another six months, and would then call another shareholders meeting.
"Within those six months, the management will do their best to put things in order, and after that the chance is high that they will try to sell the giant company to some investor," said Kabát, adding that VSŽ would likely not invest money in any non-essential projects during this period.
Another essential task of the new management will be to rid VSŽ of its financially onerous business empire. Among the firm's more questionable investments is the troubled DAM steelworks in Diosgyori, Hungary. VSŽ bought a 68.15% stake in DAM from the Hungarian privatisation agency in early January 1998 for a symbolic one dollar. DAM's annual capacity equals one million metric tons of high-quality steel, but its losses for 1998 are projected to be 3.39 billion Hungarian forints ($15.1 million) on production of 360,000 metric tonnes.
On December 14, the Hungarian daily paper Magyar Hirlap released information from an 'undisclosed source' indicating that VSŽ wants to sell its majority stake in DAM and that it is negotiating with several companies on the sale.
"VSŽ's senior management is not holding talks on the sale of DAM, and it isn't considering selling the company, in which it has already managed to decrease projected losses at a quicker pace that originally expected," said VSŽ spokesman Ján Marko.
But according to Kabát, the DAM sale would help VSŽ in its current plight. "There is a real chance that the new company's management will get rid of its majority stake in the Hungarian steelworks," he said.