What does Plan B mean for Zelezara?

(Photo: zelsd.rs)

Plan B of the Government for Zelezara is management service agreement. What does it mean? The Government will release a public call for the contract on control and management for the company which would enter Zelezara and take over management and carry out restructuring of the company.

Some experts claim that that kind of contract limits the right to the government to control the company. The consulting company however which is developing public call says it is pretty definite condition the state will not give up. Some economists think the contract will have to be atypical since it is not realistic that anyone pays to manage a loser.

We did not know on our own and a group of successful managers could not help Zelezara. The ones who know the situation agree with it. The plan B implies hiring other companies through contract on control and management. What does it mean?

- This means the one who took over the control and management decides on people they will replace with their staff and the way to organize Zelezara in the best way possible. This is where it manages and the Government is moving out as well as manager and only they manage. Their incentive to manage as good as possible is the fact they obliged themselves to pay certain amounts to an owner – consultant for foreign investments, Milan Kovacevic, says.

However, the ones who will write terms of the public all in paper say that details will be known in two days but the state will keep the control that is for sure.

- I can only say, having in mind the talks with Esmark, is the right of co-signature – we want to give the company for management, to have somebody managing Zelezara. However, we as the Republic of Serbia, at least within definite period of time, keep the right of money consumption control - Boris Milosevic from KPMG says.

The situation in Zelezara will require atypical contract, a number of economists thinks.

- I think this will have to be atypical contract. If a portion of profit should be given by a future managing company to the state, we would not find anybody to take over that kind of commitment - an economist, Milojko Arsic, says.

- It is not realistic that now someone pays for compensation. These are some concession contracts. Concession over a loser where restructuring should be done are two different things - Boris Milosevic says.

However, plan B is not a definite solution for Smederevo-based plant. The final objective is privatization, What can be achieved in the meantime?

- The company can do useful business in the transition period, to fix company cost efficiency. It can optimize headcount, find new markets, carries out changes in product range, find a strategic partner in a few months to a year - an economist, Milojko Arsic adds.

If there are no partners then, economists think it is time to consider bankruptcy. Previous examples of this kind of contract existed with US Steel before it acquired Zelezara, Etihad which was managing JAT in the same way is the second example.