Austrian fuels group OMV, the majority shareholder in Petrom, has begun analysing the structure of the Romanian company with a view to deciding how many and which employees it will lay off. The restructuring process, which is to begin soon, cannot be avoided, says the Austrian company.
Six months after the takeover by OMV, the number of Petrom employees remains the main problem facing the group in operations in Romania. There are some 50,000 people working for the Romanian company, almost nine times the number of OMV employees. Average productivity per year per Petrom employee is in the region of 42,000 euros, compared with 1.23 million euros at OMV.
The lay-offs at Petrom are to be performed a??naturallya??, an issue already being discussed by OMV, said David Davies, OMVa??s financial director, recently, as quoted by the Hungarian publication Portfolio.hu.
When asked to comment on the cost-cutting plans for Petrom, he said: a??Naturally, OMV and, as a result of its modernisation programmes, Petrom also, will go though significant changes in the future, which will also affect some of the employees. OMV is in negotiations with the unions over this matter,a?? Davies told Portfolio.hu.
Together with Wolfgang Ruttenstorfer, who is the chairman and chief executive officer of OMV, David Davies told Ziarul Financiar that they were commuting weekly between Vienna and Bucharest, where they spend at least one or two days each week.
These frequent trips by OMVa??s top managers, combined with the army of experts already assigned to Petrom to take care of the management and integration of the company, are a sign that large issues still need to be addressed requiring the direct involvement of the top decision-makers of the Austrian group.
a??Petrom has a cost per barrel of around 11 US dollars, which is way above the European average. OMVa??s production cost per barrel, for example, is close to 6 US dollars,a?? Davies explained. Nonetheless, Petrom has high growth potential and production costs will slowly approach the OMV level, he added.
a??Petrom has over 13,000 oil wells and their worst-performing 10% is responsible for only 1% of its production. This is an area where after careful analysis we could cut costs considerably.a??
These conclusions come half a year after OMV took over the reigns at Petrom. It was Petroma??s drilling and production portfolio (estimated at one billion barrels) that persuaded the Austrian group to buy the Romanian company, a move that resulted in a tripling of its own hydrocarbon reserves. However, it also inherited another big problem – Petroma??s army of over 50,000 employees, who generate meagre profits and an annual turnover of around 2bn euros.
OMV, which acquired 51% in Petrom for 1.5bn euros, generated 642 million euros in net profits in 2004 from sales of 9.88bn euros using 6,475 employees (nine times less than Petrom).
Another oversized Petrom segment compared with OMV is Petroma??s filling station network. OMV uses a franchising system, while Petrom has preferred to own its own stations.
OMV managers have been relatively cautious when making statements about the number of Petrom employees to be laid off, particularly because negotiations with the unions, which are led by the powerful Liviu Luca, are still under way. adrian.mirsanu@zf.ro