Bidder sought to rescue troubled chemical company

In August 2012, employees of Romania’s state-owned Oltchim chemical company first protested against non-payment of salaries. Several attempts to privatise the company have failed and, in June 2013, almost 1,000 employees were dismissed and the working week was reduced to four days. One year on, employees still have not received salaries, nor have those made redundant received their severance pay. The authorities are still seeking a way to save the company.

Economic context

The chemical company Oltchim Râmnicu Vâlcea was, until 2012, the flag bearer of the Romanian chemical and petrochemical industry. It had a reputation as a national brand and had a workforce of 3,200, some based at the primary site in Râmnicu Vâlcea and the rest 60 kilometres away at the petrochemical site at the former Arpechim refinery in Piteşti.

The Piteşti site was the property of Petrom, who was the exclusive supplier of materials to Oltchim and was technologically integrated with it. However, after the state-owned Petrom was taken over by the Austrian OMV Group, Oltchim needed finance to purchase the petrochemical division of the Arpechim refinery. Such an investment required the approval of the Directorate General for Competition of the European Commission (EC), but this was delayed. As a result, OMV Petrom took the decision to close down the Arpechim refinery, cutting off the supply of essential materials for some of Oltchim’s products and, by June 2012, only 16% of its production lines were in operation.

Trade unions’ reactions

In August 2012, when the newly formed government cabinet discovered that Oltchim had accumulated debts of more than €500 million, the decision was taken to stop operations in all Oltchim’s facilities. Employees, protested, demanding payment for July and August, compensation for meal tickets due and a state injection of capital so that the company's work could continue. Following hunger strikes by some workers, the authorities ended the protests by promising to pay the salary arrears and to restart operations.

Because of Oltchim’s debts, it was included on the list of state companies under surveillance in accordance with the loan agreement signed by the government of Romania, the International Monetary Fund (IMF), the World Bank (WB), and the EC.

The government then did its best to privatise Oltchim and, in September 2012, representatives from the Oltchim Free Trade Union (SLO) and the Chemical and Petrochemical Free Trade Unions Federation (FSLCP), which is affiliated to the National Trade Union Confederation (CNS Cartel Alfa), requested that the government urgently proceed with the sale of the Oltchim chemical works, debts included, and of the Arpechim petrochemical division. This would, they believed, secure a source of finance for the further operation of the works and the payment of outstanding salaries. At the beginning of October 2012, work partly resumed in some of the plants and approximately 800 of the 2,600 workers at Râmnicu Vâlcea returned to work.

Hunger strikes

The company’s management was replaced, as was its trade union leader, accused by employees of not having defended workers’ interests. At the end of October 2012, however, a court ruled that the former trade union leader had been unfairly removed from his post, generating discontent among the company employees who had opposed him.

The first privatisation attempt failed, and salaries for September and October were not paid. More than 500 Oltchim and Arpechim workers resumed protests in November, striking for three consecutive days in a row with some going on hunger strike.

In response, the Minister of Economy, Andrei Gerea, promised that salary arrears would be paid and that work at the three other plants would be restarted by December 2012. Prime Minister Victor Ponta said Oltchim would undergo a restructuring process and called upon employees to end violent protests that might deter potential private investors. However, under the leadership of the reinstated SLO union leader, and with the new ‘Victoria’ trade union made up of workers who challenged the union leader, protests continued.

In January 2013, the government approved a memorandum in which Oltchim was declared insolvent and placed under the management of a consortium. As the year progressed, workers again protested against the non- payment of salaries for the first half of 2013, and in June the receivers’ representative announced that almost 1,000 employees would be made redundant (600 in Râmnicu Vâlcea, and 327 at the Petrochemical Division in Piteşti). Those made redundant would receive severance pay from October 2013.

Management blamed

A lack of raw materials and working capital were blamed for the decision to reduce operations during the period from July to September 2013, to switch 725 workers to technical unemployment on 80% of their basic salary, and to reduce the working week from five to four days.

In June, in response, trade union leaders from Oltchim, the National Salt Corporation, the Vâlcea Mining Subunit and the Govora Soda Manufacturing Plant (USG), all of which supply raw materials to the Oltchim works, met to discuss a joint protest involving 3,500 employees. They were demanding payment of outstanding salaries, challenged management for a labour recruitment policy based on political criteria, and for failing to draw up a recovery plan for Oltchim. However, no protest has yet been held.

At the beginning of August 2013, SLO and CNS Cartel Alfa called a press conference under the slogan ‘Save Oltchim from Bankruptcy’. They told the press that, since the opening of the insolvency procedure in January 2013, the situation at Oltchim had deteriorated steadily and that salaries had still not been paid for the months of December 2012, January, April, June and July 2013. Furthermore, workers who were laid off in June had not received the severance pay promised.

The trade unions blame the receivers for not finding a means of rebuilding the company, and say that the collective redundancies and technical unemployment are the underlying cause of Oltchim's bankruptcy. CNS Cartel Alfa’s leader, Bogdan Hossu, said that:

Oltchim is not just a social time bomb for its own employees; it is also a capital blow dealt to Vâlcea County as a whole, because it will have horizontal effects on the county's industry and social life. They hope that if they fire the workers step by step, rather than sacking them all at once and shutting the company down, the social conflicts will be diminished.

He added that ‘the intention is to hack Oltchim apart piece by piece, which would fetch profits in the region of €900 million to its grave- diggers’.

Although Oltchim’s union representatives have met with the Minister of Economy five times already, they are disappointed that their meeting with the Prime Minister has been put off time and again. The authorities claim that they are still looking for recovery solutions and for investors who are interested in taking it over.

Commentary

Oltchim’s critical situation has, among other factors, been caused the inability of decision-makers to find a privatisation concept for the complex industrial aggregates that were designed, both technologically and economically, to work as an integrated whole, even though operations were spread across several different locations. Oltchim’s bankruptcy will have a devastating impact on the entire economy of Vâlcea County and its county seat, Râmnicu Vâlcea. Indeed, it could be said that Oltchim is the only industrial facility keeping Râmnicu Vâlcea alive.

Action by the government and local authorities is of the utmost importance. Government officials claim to have found bidders, but it remains to be seen how the new attempt to privatise Oltchim will be resolved.

Constantin Ciutacu, Institute of National Economy, Romanian Academy

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