International Bank / Portfolio Divestment


Business rescue and turnaround of a $250M Eastern European Tyre Group based in Romania, preparation for sale and disposal of the investment.


2001 – 2002 (16 Months)


International Bank Investment: Cash Control, Business Rescue & Disposal

Line Role:

Interim President/Director General

Assignment Length:

16 months


A state-owned Romanian tyre manufacturer and distributor of approximately 6,000 people, with sales of $250 million and fixed assets of c.$500m, had been privatised in 1997 with Nomura Bank taking a 50% shareholding. The Romanian “partners” ran the business on a day-to-day basis with Nomura providing the financing.

The legal structure of the group was a mixture of ‘closed’ companies and ‘open’ ones, the latter being quoted on the Romanian stock exchange and therefore subject to the local requirements for running such organisations in the public domain.

The business was a large, low-cost manufacturer of automotive and industrial tyres but operating within a hyper-inflationary environment. The Romanian economy has little cash in it, with complex barter or ‘compensation’ deals operating extensively.

During 2001, the business was operating on a “hand-to-mouth” basis. Suppliers were refusing to deliver raw materials due to non-payment and the ongoing payroll commitments could not be met. The business had a $30 million shortfall between current assets and current liabilities.

The Business Was:

  • losing sales due to lack of sales management and poor product quality
  • highly inefficient
  • poorly managed across all functions
  • burdened with a large overhead cost structure
  • lacking in financial management disciplines; and
  • technically insolvent

Faced with this crisis, Nomura replaced the Romanian partners with a two-man team of experienced turnaround professionals from the UK.

Assignment Brief:

As interim President to ensure that the Group operated to international standards of accounting (IAS) and to adhere to the highest standards of good corporate governance. A key deliverable was to enable the disposal of the Group whilst achieving the best possible value added.

The immediate targets were to:

  • Achieve a positive cash flow position
  • Improve product quality
  • Recruit and develop a management team to take the business forward
  • Rationalise the head office structure
  • Re-negotiate payment terms with all major creditors
  • Institute tight financial control
  • Increase the volume and prices for export sales


  • Approximately 80% of the business (the automotive tyre divisions) was de-merged and sold to Group Michelin in the form of an asset sale, with the main proceeds going directly to the shareholders. As a result, the remaining industrial tyre business was burdened with the debt and liabilities of the original group.
  • A strong team of young Romanian professionals was recruited and developed.
  • Tight financial controls were implemented including budgetary control, business planning systems, treasury management and $-based financial statements in accordance with International Accounting Standards.
  • The export sales team achieved best ever, monthly sales (c.15%) with increased prices (ave.3%+) to its major markets of N. America, W. Europe and the Middle East. New business was generated into Australia and S. America.
  • Enormous improvements were achieved in the definition of product quality and the adherence to standards. 1st Quality rose from 85% to 96% within 4 months.
  • Head office numbers were reduced from 230 to 30 people.
  • Factory union agreements were obtained to full and partial layoffs of 15% of the work force.
  • The $30m shortfall between current assets and liabilities was reduced to $10m over the assignment period by:
    • $2.5m of inventory being liquidated
    • $13m of problem receivables being liquidated
    • c.$10m of suppliers’ debts being paid or re-scheduled, key suppliers identified to recommence sourcing at lower prices, improved payment and delivery terms with better material quality.
    • $5m state liabilities paid and re-scheduled.
    • $3m, 12 month bank loan being repaid on time.
    • $4m of new equity arranged

The group of companies had been strengthened to the point where it was possible for the organisation to see a sustainable future. The business was eventually sold in October 2002 to a Romanian buyer.

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