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Interview with
Mr. Traian Novolan,
Executive General Director
March 23rd, 2000
Contact:
Str. 13 Decembrie no.210
0150 Gaesti, ROMANIA.
Contact persons:
Mr. Traian Novolan, General Director
Tel.: 40 45 71 03 62
Fax: 40 1 312 28 73
E-mail: tnovolan@arctic.ro
Cristina Avramescu, Manager Assistant
Tel.: 40 45 71 05 65 ext.243
Fax: 40 (1) 312 28 73
E-mail: office@arctic.ro
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After 1989 your company became very successful. What is the secret of your success?
Since 1975, well before the Revolution we were present on the western market with pretty big quantities of refrigerators and with yearly growths. In 1989 we produced 430,000 units out of which 320,000 were sold on foreign markets - 70% in England, France and Germany. Arctic and its executive management have always been in a continuous relation with the competitive and free market in Western Europe, so the market economy was not new for us. The passage from the super-centralized economy in Romania to the competitive market economy did not make our company collapse. We have very quickly reoriented ourselves having come to the Romanian market at a time when there was an excess of money. The employees of a company were kind of shareholders. In 1990 they were given back in cash the value of the so-called shares that they had in this company. Thus appeared an excess of cash on the market.
Until 1995 there was a very active market in Romania. A lot of commercial companies with private capital were established here, and the Arctic type of companies were transformed into Stock companies. We have re-invested all the profits. We made the entire range of products to be more ecological. On the social plan, with the funds we had we built 49 apartments for our employees. We have built a new technological line for horizontal freezers, which were not made in Romania before, although there was a demand for them. These freezers are both for domestic and commercial use. I think we have stimulated the market with totally useful products built for Romanians.
Of course we had to make a step forward because, as for everything else, for the refrigerators fashions change fast. There are fridge s with curved doors and more sophisticated models for which new technologies are needed. Unfortunately we did not have the money for this kind of investments. Our company was attractive for foreign investors, not only for the plant, but also for the market. In Romania the refrigerator market was only 50% serviced. Out of 7,5 million families in Romania, only half of them had refrigerators in the house in 1997. Besides, there was also the replace (spare parts) market. So, in fact, different potential investors and buyers have visited us trying to obtain the majority of shares.
When the EBRD showed interest in buying a major package of shares (for them it was a first experience to become not only financial involved but also to become investors), the management of Arctic realized that actually the only chance for the factory to make a step to the future was to be purchased by the EBRD. So, we privatized Arctic in association with the EBRD and Société Générale on October 14th 1997, when 51% of the shares were purchased and a formal contract was signed. At that moment, and regardless of all the impediments the investments plan had posed, Artic started to develop new ranges of products and the modernization of the technological lines. The program started effectively in May 1998 at the same time that the effective financing was versed into our accounts.
We had no restrictions in choosing the models we were going to produce, the technologies we were going to apply or the equipment that we were going to buy. The technicians form Arctic did everything. A design company from Italy helped us for the general architecture of the refrigerator, but the conception, construction and cooling mechanism was done by us. Now, the appreciation of our results is in the hands of the market. I can say that they are beautiful but if the market does not accept them, then they are not any good.
Between the 2nd and the 7th of February 2000 we have presented for the first time the new range of products in an international fare - Confortec - in Paris and at a first estimation we have appreciated that our models have been successful. Besides, traditional companies that bought refrigerators from us have started to also sell the new range. We have also signed new contracts. But what is more important for me is something else. In Paris we have been visited not only by buyers of refrigerators, but also by big producers who have shown a lot of interest. This time even the producers and competitors came and analyzed what we presented. We already have positive reactions, meaning collaborations on the production line and on technology. Our shareholders, the two banks, are only financial investors, not producers. They have invested some funds, they have raised the value of the shares, and more than surely they will just sell them on the market. It is something normal in the "white products" producers.
| You sell a lot of your products abroad in supermarkets but they put their own trademark. How are you planning on getting your name "Arctic" better known in the international market?
There is also a market for the name. If on a product manufactured at Arctic that from the design point of view looks special I put instead of "Arctic" the "Whirlpool" label, automatically the market price of the product increases. For example, Electrolux has bought a company called Lehel in Hungary and Lehel is a brand name. In Hungary the refrigerators are sold under the name of Lehel. When they come to Romania, the same product is not called Lehel anymore but Electrolux or Zanussi, even though it is the same product. It is more of a commercial thing.
For example, as far as I know, the big network in Germany - Quelle - has only one name for all the products it sells called Privileg, regardless if they are made by companies from Germany, Romania or other countries. It is just a private brand name. It is very difficult to penetrate a big market like Germany, France, England with own names especially coming from the former communist countries.
Long time ago, in 1987, we also exported to America. Then Romania had the Clause of Most Favorable Nation and we were exempted from paying taxes. With this money we paid for transport Americans liked our products very much. They even made a contribution to our logo, making a connection with the Arctic. They said they liked the name Arctic but that they wanted a penguin on the refrigerators. However since penguins live only in the South Pole we put a seal instead. This is how got the seal on our label.
Europe is more conservative. I hope that when we have a promotional program for abroad we will also try to promote our products with the name Arctic. With our label Arctic we have sold products in Greece, Yugoslavia, in Northern Africa, Portugal and Spain. However in Europe on the three main markets: France, Germany and England we could not.
Are you going to diversify your range of products?
This is the idea of the executive management. We are capable of doing so. We will make a proposal, so that on the already existing spaces that we do not use after the modernization we can start producing A/C machines, stoves or washing machines. Actually it is slightly more difficult for us to produce washing machines. The easiest would be to produce A/C systems because for us they do not show any special problems. The same applies to stoves. But the decision is not ours, it depends on the board and the main shareholders. I do not know the policy of our main shareholders regarding Arctic's future.
Could they sell the company to whomever they wanted or you can tell them that you have been contacted by certain companies and that you would like them to take this into consideration?
I can tell them this but I am not so sure they will take it into consideration. There might be special clauses in the contract that I do not know. My feeling is that probably Whirlpool will be the company which might have the biggest interest in Arctic. This Arctic's new range of products is addressed more for the clients similar to those of Whirlpools'. The products are demanded both on French-Italian type market and on German type market. Independent, monoproducts such as Arctic size, as far as I know, are not in Europe and it is very difficult for them to resist from the financial point of view in a very tough competition market. Big companies also produce in the same plant or in different ones besides refrigerators other products such as washing machines, ovens, etc. So, when temporally they do not sell one product they can compensate by selling other ones. They orient their different products according to the market requirements at a certain moment. From this point of view we are in difficulty by backing up the financial expenses with the stocks of finished products during the periods the sales decrease due to the market juncture. |
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© World INvestment NEws, 2000.
This is the electronic edition of the special country report on Romania published in Forbes Global.
July 24th 2000 Issue.
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