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IfIGARY
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for success
CM travelled to Budapest to meet the chairman of Hungary's largest
transport and logistics company. Dominic Perry reports.
you've probably seen their trucks:yellow tractor units pulling dark-blue trailers emblazoned with a picture of a beaming sun and bearing the legend "Waberer's Optimum Solution". The sun features in the Hungarian version of -good day", so the livery is designed as a greeting to the world.
I've travelled to Hungary to meet Gyorgy Waberer (pictured, right), the chairman of the Waberer's Group, to find out more about the difficulties of running a logistics and transport business in Eastern Europe.To this end I'm shuttled all over Budapest by the firm's tireless PR man,Tibor Szentgyorgyi, to see various parts of the Waberer operation.
It's not until seven that evening that I finally catch up with Waberer in a hotel bar a stone's throw from the Danube.
After a brief hello in my appalling Hungarian, the first thing Waberer does is to apologise for the fact that he's dressed down for the occasion, thanks mainly to having driven all the way across Hungary to get here. I find this a little odd — it's the first time that anyone running such a sizeable business has felt it necessary to apologise to me for their dress — but it seems to fit with his softly spoken style.
Of course, being softly spoken in no way prevents you from making the harsh decisions sometimes necessary in business. Waberer has certainly shown steel in this area.
That steel is now turning around the fortunes of a formerly state-run transport firm, Volk] Tefu.This business was part of the Vain group, which controlled all manner of domestic freight and passenger transport.
It had been put up for privatisation on three separate occasions.The state was desperate for money to fund its post-Communist rebuilding and anxious to get a company off its hands that, were it not government-owned, would have long ago been declared bankrupt.
While Hungary is one of the wealthier exCommunist nations the state simply could not cope with a company that was losing over 150% of its turnover each year; a 1,200-employee trash can.
Taking the plunge Unsurprisingly there were few takers—but when Volan Tefu was put up for sale for the third time in 1994, Waberer decided to take the plunge. However, he recalls that it wasn't easy to raise the capital: "It was a very difficult process to buy this company. I met with bank after bank and countless other institutions in order to get the funding for it but its figures were so bad that none of the institutions believed that the privatisation could be a success "Finally.he adds. "I found a bank that was willing to believe in the business concept and I became the owner." With the company in his hands Waberer faced the daunting task of returning it to profitability: "I always believed that I could make it work but there were a number of things that made me nervous: particularly the restructuring that was going to be needed, including redundancies and trying to manage the company's debts" Perhaps redundancies were anticipated by some staff, perhaps others thought the cosy communist structure would remain. It was no doubt a shock of the harshest kind to find threequarters of the workforce culled: that meant 900 people laid off, immediately.
Waberer continues: "You don't know the way of socialist business — being employed at that time didn't mean you had any obligation to do any work. After we trimmed the deadwood we only had employees left who wanted to work —without these people there was no way! could push for better sales results That's why the first three years were so risky."
Waberer stresses that he always had faith in the company."What was important in this period was to have a strong belief in the feasibility of improving the business figures and changing it into a successful company." Mind you, when your house and assets are on the line if it goes wrong, there's extra incentive to get it rig,ht.
Aside from the wholesale redundancies he also managed to secure a number of deals that delayed payment of the firm's debts for three years. giving it valuable breathing space.
When the debts were finally paid off expansion and development could finally start. After a number of other acquisitions, by the end of 2002 the largest of Hungary's formerly state-owned firms, the well-regarded international carrier Hungarocamion (already in the hands of a private equity firm) had been added to the portfolio.
Another challenge This acquisition was a classic case of déjà vu:"It was a similar challenge to when we bought Volan almost 10 years earlier. Because Hungarocamion had been privatised five years later than Volan and was in the hands of a venture capital company, all the restructuring work had been postponed. So when we bought it, it meant we had to do the same jobs we'd done 10 years before.
Hungarocamion livery still graces some of its trucks, but that name will disappear for good next year as the fleet replacement programme disposes of the last Hungarocamion trucks and the Waberer livery becomes the norm.
Eleven years later and group turnover is 60 Limes higher than at privatisation last year that amounted to 63m with a profit of Ellm. The number of employees has rocketed past its former level as well;it currently sits at 3,200 and the group now owns some 28 transport companies across the region.
Inevitably the conversation turns to the issue of unfair competition. It's a charge frequently levelled at companies from the countries that recently joined the EU, but not one Waberer has a great deal of time for.
He argues that it's just business: "It's not a fair view because there are a lot of other companies that arc cheaper than Waberer's. Besides competition is also mid-term you can't depend forever on the current low-level wages in Eastern Europe. Wages are going up all the time and the price advantage will disappear in a short while."
Competition from outside
Besides which, Waberer points out that firms in many of the accession states are themselves undercut by transport companies from outside the EU; for example from Turkey, Bulgaria and Romania where wages are considerably lower.
There's no denying that Hungarian drivers earn less than their UK counterparts, but it's an aspect of his business that Waberer defends robustly: "I believe that they have a good wage. If you take the relative cost of living into account then you'll find that a driver employed by Waberer's has greater buying power than a UK driver. "I believe that only employees who are satisfied with their job and their wages are able to give good performance. That's the theory behind my approach, anyway."
The most recent change to Hungary was its accession to the EU, but far from causing a seis ink shift in its economy, the benefits seem to have been mainly administrative:an absence of borders and permits to manage has made the whole operation easier to run.
Waberer adds: The key difference is the absence of borders,This has enabled us to predict journey times much more accurately. Before this border crossings into the Czech or Slovak Republics could last anywhere up to 24 hours and getting into Austria could take 12. Now the vehicles can move much more freely."
The price of freedom
There is, of course, a downside: "The market suddenly became much freer. Not just in Hungary but in all the new states. This has also meant a dramatic increase in the number of competitors who have come into the market and an overcapacity in haulage.
"However, we feel we are a little isolated from this as we are offering a slightly different product. We are not a logistics company or a haulage company but are offering customers a complex package specialising in the central and eastern European region.
-We are looking optimistically for an optimum future," he concludes. •