Czech engineering giant thrown lifeline by arms group founder

Illustrative photo: Martinelle, Pixabay / CC0

One of the Czech Republic’s biggest engineering groups appears to have been thrown a lifeline by one of the country’s main arms producers and sellers. Under the proposed rescue plan, Vítkovice Heavy Machinery, which employs around 1,000 mostly around Ostrava, will be heading into new hands.

Illustrative photo: Martinelle,  Pixabay / CC0
Vítkovice Heavy Machinery is one of the Czech Republic’s biggest engineering companies and in the past one of its flagship exporters. It specialises in contacts for providing large and expensive pieces of machinery for power plants, container ships, steel mills, mining businesses, and chemical plants.

But what appeared to be a multi-billion crown cash cow business appears to have fallen on hard times. Since January, around 800 workers have been sent home on 80 percent of normal pay as attempts are made to salvage the company’s future and kick start it again.

The main reason why production has ground to a halt is the lack of operating capital to pay for day-to-day supplies and orders. Debts mounted up to around 3 billion crowns although agreements to forgive some of that debt burden had been sealed with some of the creditors. Vítkovice Heavy Machinery is part of the much wider engineering and industrial holding, Vítkovice Group of businessman Jan Světlík. Parts of the group have already been sold off.

Over the weekend, the announcement was made that the company SPV VTK of the founder of the Czechoslovak Group, Jaroslav Strnad, has offered to take a major stake in Vítkovice Heavy Machinery with a view to solving its current debt problems and pusing through a reorganisation that could offer it a stable future.

In fact, Strnad’s group proposes to take a 51 percent stake in the company, bring in new managers, and pilot a far-reaching shake-up. Some of the existing creditors are expected to swop their debt for a stake in the new company.

That final reorganisation package hinging on the arrival of a new investor still has to be approved by the major creditors and given the stamp of approval by a court.

Jaroslav Strnad is best known perhaps for his ownership of the arms production and dealing company, Excaliber Army former Excaliber Group. But he also bought into one of the Czech Republic’s oldest iconic companies, Tatra Trucks, and has taken credit for its turnaround in fortunes. His companies are reckoned to have an annual turnover of around 13 billion crowns and profits of around 1 billion crowns.

Strnad also hit the Czech headlines recently when he was declared as one of the major sponsors of the re-election campaign of president Miloš Zeman.

In his initial comments over the proposed takeover, Strnad has said that Vítkovice Heavy Machinery should be kept separate from the rest of his business empire as the restructuring proceeds. But tie-ups and cooperation with the other arms and industrial firms will be sought.

An advance of around 850 million crowns from Strnad’s company should help to get the Ostrava engineering company up and running again. Strnad has said he sees the same potential for a turnaround in fortunes with Vítkovice Heavy Machinery as he previously saw with Tatra Trucks.