Biazet gets chance for recoil through debt agreement
In early December, the company finalized a debt conciliation agreement with major creditors Pekao and the State Treasury to write off all unpaid interest and at least 80% of the principle on outstanding debt.
"I think it will be a good new year," said Stanislaw Kondracikowski, Biazet's chief financial officer. "It's a long road out of the dark, but now it's clear that we won't be threatened with bankruptcy for at least another six months."
That may not sound like a truly optimistic statement, but considering the state the company was in, it's actually a statement of hope.
Biazet's troubles date back to the late 1980s, when markets in the former Soviet-bloc countries - COMECON - began drying up as a result of economic depression. At that time, the company was producing induction components for television sets, and its main client was Polkolor, the leading Polish TV factory.
But when French electronics company Thomson bought into Polkolor, the French began importing the induction coils they had previously purchased from Biazet, which led to a 25% drop in sales.
"We were a components maker, but when the market collapsed and Thomson came in, we had to look around for new opportunities," Kondracikowski said. "That's when we went into TV."
The trouble is, so did everyone else.
"This was the worst time to go into TV," said Andrew Alexand-rowicz, principal of ITCA Europe Ltd., consultants on the restructuring of the company. "There were a lot of cheap imports flooding into the market, and everybody and their mother was starting up kit TV assembly."
This hefty competition led to an extremely competitive market with very tight margins. To make money in that type of environment, a company needs volume - at least 100,000 sets annually to break even - something which Biazet, as a newcomer, couldn't produce.
"In this business, if you get raw materials 5% higher than your competitors, you're dead," Alexandrowicz explained. "And if you're an unknown Polish producer, the only reason people would buy you is if you're cheaper.
There is a place for the Biazets of the world to exist, but you have to start with a large enough scale, and they were nickel and diming it."
By 1993, the company was already in trouble, and it signed its first debt conciliation agreement on the basis of the pre-war bankruptcy law, which only included loans not secured with collateral. Biazet then made a decision to produce a higher-end, 25-inch TV set, trying to move out of the more crowded market for smaller sets. Despite several million dollars spent on research and development, "this TV never saw the light of day," Alexandrowicz said. "Their R&D department couldn't even make a proper remote control."
In early 1995 the company was back on the brink of bankruptcy, with net losses reaching zl. 1.3 million ($540,000) in February on sales of a meager zl. 639,000 ($266,000). By the time the first payment came due on the company's restructured debt in April, Biazet was already two months behind on paying salaries. The company had accumulated around $20 million in debt by this time, and the coffers were empty.
The savior was meant to be the Mass Privatization Program, but unfortunately Biazet's time ran out before the program finally got off the ground.
What could actually save the company turned out to be right under the management's noses all along - induction coils. While not generating the revenues that televisions can generate, the components are good quality and much more profitable than TV sets.
The problem was getting the company to see the components as the core business. "There was always a difficulty in seeing this as an independent business," Alexandrowicz said. "They saw it more as an internal supplier for their TV manufacturing, and they were only running the machine three days a week."
Biazet is one of the only producers of the more modern dry-coil components in Poland, with the winding done on a Swiss machine, and there has been talk of getting the ISO 9000 for the component. It is also the only company making components for both cars and television sets.
Fiat Auto Poland has increased orders for the components, from zl. 100,000 ($41,600) in November of 1994 to zl. 250,000 ($104,000) in September of last year. Other car manufacturers, like Polonez, are also turning to Biazet as a supplier, and Fiat, once Biazet's sole client, now only accounts for one-third of its sales.
To increase efficiency, several divisions were spun off and employment was reduced from 600 near the beginning of last year to 300 today, a move that was taken well by the unions. "There was an understanding that every workforce cut came one year too late," Alexandrowicz said, adding that at its height Biazet employed 3,000.
Slimmed down, with several departments spun off into separate companies, Biazet was ready to ask for a reduction of its debt, which was still causing it to show losses. "This was possible only because we showed them what our present potential is," Kondracikowski said. "The possibilities are real now - I can see them, and not only on a piece of paper."
"I think it will be a good new year," said Stanislaw Kondracikowski, Biazet's chief financial officer. "It's a long road out of the dark, but now it's clear that we won't be threatened with bankruptcy for at least another six months."
That may not sound like a truly optimistic statement, but considering the state the company was in, it's actually a statement of hope.
Biazet's troubles date back to the late 1980s, when markets in the former Soviet-bloc countries - COMECON - began drying up as a result of economic depression. At that time, the company was producing induction components for television sets, and its main client was Polkolor, the leading Polish TV factory.
But when French electronics company Thomson bought into Polkolor, the French began importing the induction coils they had previously purchased from Biazet, which led to a 25% drop in sales.
"We were a components maker, but when the market collapsed and Thomson came in, we had to look around for new opportunities," Kondracikowski said. "That's when we went into TV."
The trouble is, so did everyone else.
"This was the worst time to go into TV," said Andrew Alexand-rowicz, principal of ITCA Europe Ltd., consultants on the restructuring of the company. "There were a lot of cheap imports flooding into the market, and everybody and their mother was starting up kit TV assembly."
This hefty competition led to an extremely competitive market with very tight margins. To make money in that type of environment, a company needs volume - at least 100,000 sets annually to break even - something which Biazet, as a newcomer, couldn't produce.
"In this business, if you get raw materials 5% higher than your competitors, you're dead," Alexandrowicz explained. "And if you're an unknown Polish producer, the only reason people would buy you is if you're cheaper.
There is a place for the Biazets of the world to exist, but you have to start with a large enough scale, and they were nickel and diming it."
By 1993, the company was already in trouble, and it signed its first debt conciliation agreement on the basis of the pre-war bankruptcy law, which only included loans not secured with collateral. Biazet then made a decision to produce a higher-end, 25-inch TV set, trying to move out of the more crowded market for smaller sets. Despite several million dollars spent on research and development, "this TV never saw the light of day," Alexandrowicz said. "Their R&D department couldn't even make a proper remote control."
In early 1995 the company was back on the brink of bankruptcy, with net losses reaching zl. 1.3 million ($540,000) in February on sales of a meager zl. 639,000 ($266,000). By the time the first payment came due on the company's restructured debt in April, Biazet was already two months behind on paying salaries. The company had accumulated around $20 million in debt by this time, and the coffers were empty.
The savior was meant to be the Mass Privatization Program, but unfortunately Biazet's time ran out before the program finally got off the ground.
What could actually save the company turned out to be right under the management's noses all along - induction coils. While not generating the revenues that televisions can generate, the components are good quality and much more profitable than TV sets.
The problem was getting the company to see the components as the core business. "There was always a difficulty in seeing this as an independent business," Alexandrowicz said. "They saw it more as an internal supplier for their TV manufacturing, and they were only running the machine three days a week."
Biazet is one of the only producers of the more modern dry-coil components in Poland, with the winding done on a Swiss machine, and there has been talk of getting the ISO 9000 for the component. It is also the only company making components for both cars and television sets.
Fiat Auto Poland has increased orders for the components, from zl. 100,000 ($41,600) in November of 1994 to zl. 250,000 ($104,000) in September of last year. Other car manufacturers, like Polonez, are also turning to Biazet as a supplier, and Fiat, once Biazet's sole client, now only accounts for one-third of its sales.
To increase efficiency, several divisions were spun off and employment was reduced from 600 near the beginning of last year to 300 today, a move that was taken well by the unions. "There was an understanding that every workforce cut came one year too late," Alexandrowicz said, adding that at its height Biazet employed 3,000.
Slimmed down, with several departments spun off into separate companies, Biazet was ready to ask for a reduction of its debt, which was still causing it to show losses. "This was possible only because we showed them what our present potential is," Kondracikowski said. "The possibilities are real now - I can see them, and not only on a piece of paper."
