Grundig strives to stay afloat

By Timothy Sifert

While Grundig Polska appears not to be pitted in the severe financial straits of its German parent firm, which filed for protection from its creditors, executives at the local arm of the company fear that the mere news of insolvency will push consumers away from its electronics products.

"The biggest problem is the relationship with the end user," said Paweł Bałamucki, product manager and marketing specialist at Grundig. "Because Grundig AG is facing (possible bankruptcy), maybe the end users will hesitate to buy our products."

Bałamucki said there was no indication yet that consumers have shifted their gaze to other brands, especially in its color television products, which produce the most turnover for Grundig Polska. He said that he hopes consumers can see the German parent's move to file for protection from its creditors as a constructive, preemptive step to avert a corporate disaster.

"This announcement was made with the purpose of maintaining the core business," Bałamucki said.

The parent company filed for bankruptcy protection on April 14 after talks with foreign investors to rescue the operations had failed. Grundig is a well-known brand in Germany, as it was one of the first vendors of TVs in the 1950s. In 2001, it recorded an annual loss of €150 million.

And while the status of the end user in the Grundig supply chain is uncertain, Bałamucki said that at least for now its vendor clients are maintaining confidence in the Grundig name.

"I think that they are trying to believe that we will be able to maintain our services," he said. "There's no indication that's not the case."

Despite the ambiguity surrounding the bankruptcy filing, Bałamucki said that the company's most important business operations in Poland are sound.

"There has been no change in deliveries or payments," he said. "There is no change to the situation in Poland at the moment. If something happens negatively in Germany, then maybe."

Robert Maciejko, managing director of the Boston Consulting Group in Warsaw, said that the woes of Grundig Polska's parent are not necessarily affecting its business here too severely.

"It is possible for a company, even if its mother company has problems, to be successful," he said, citing Fiat as an example.

Grundig Polska increased its market share of TV sets by 6%-8% last year. The company's bottom line, however, has been sagging in recent years since it produces televisions in Europe rather than Asia, where labor costs are lower, especially for electronics manufacturers.