Thursday, February 13, 2014

Troubled State Rail Freight Carrier Merges with Intermodal Arm and Makes Swingeing Cuts to Survive

Redundancies and Talks of Privatisation Amidst Restructuring and Corruption Allegations
Shipping News Feature

CROATIA – ROMANIA – After failing to sell a 75% stake in its struggling rail freight line HZ Cargo, the Croatian Government has signed an agreement with the Railroad Engineers Trade Union of Croatia (RETUC) that will see the company undergo some major changes as 1,100 employees from HZ Cargo’s 3,482 strong workforce will be made redundant with the remaining salaries reduced by 20%. Also part of the restructuring plan, everything which does not belong to core business will be sold and expenses for employees and severance payments will be reduced. In a bid to control the debt and keep it solvent in the short term, the Croatian Government has proposed injecting €30 million into the cargo business as well as implementing plans to merge HZ Cargo with its intermodal subsidiary Agit.

The cash injection from the Government had been dependant on whether the management of HZ Cargo accepted the restructuring plan within 14 days of its proposal by the Ministry of Maritime Affairs, Transport and Infrastructure. HZ Cargo is currently in long term debt of over €104 million with short term debt at approximately €32 million. Minister of Maritime Affairs, Transport and Infrastructure Siniša Hajdaš Dončić had threatened the company must file for bankruptcy if agreement had not been reached.

The Minister has emphasised that he sees HZ Cargo in the future as a consolidated carrier with an optimal number of employees who can generate revenues higher than expenditure, unlike the present situation, the reason why the company has gone into long-term debt. Dončić also said that the privatisation will go ahead but not before next year as the aim was to get the cargo unit ‘to profitability by the end of the year'.

Meanwhile, the owner of the Romanian rail group that was set to buy the 75% stake in HZ cargo, Grup Feroviar Roman (GFR), was arrested over allegations of corruption at the end of January. Romanian billionaire Gruia Stoica allegedly offered lawyer Doru Bostina €3 million to find out how much Romanian state owned rail freight operator CRF Marfa had bid on a tender to transport coal.

GFR had recently failed to purchase a controlling share in CRF Marfa after the state had apparently not met its obligations in the privatisation procedures.

Photo: Some of the HZ Cargo rolling stock is a little ‘weathered’.