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Czech Republic: Profile Of A Company Propelled To Success

By Jiri Kominek

Prague, 15 April 1997 (RFE/RL) -- A company from the landlocked Czech Republic is achieving success on the world market in selling a product meant for the sea, namely propeller shafts for ships.

How did the steel company Vitkovicke Zelezarny come to be engaged in building heavy machinery for marine uses? Well, that's a long story, which started exactly a century ago this year. At that time, the Czech lands were part of the Austro-Hungarian Empire, which of course had its own coastline, and a good size navy as well as a trading fleet.

Now, a century later, having survived under political systems ranging from monarchy through communism to democracy, the heavy machinery division of Vitkovicke Zelezarny is looking for new customers in the world at large.

Frantisek Brenkus, the manager of the heavy machinery division, based in Ostrava, told an RFE/RL correspondent that the company is using the current global surge in shipbuilding to spearhead a drive into the lucrative Asian market. Asia is seen as the main area of potential sales growth.

Vitkovice already sells to Chinese and Korean shipyards. In Korea, customers include Hyundai and Hanjung, while in China the Shanghai, Hudong and Daliam shipyards have become steady customers.

But Brenkus said Vitkovicke has recently achieved a breakthrough, in that it has signed a contract with Kobe Steel of Japan. Until recently, Kobe was a formidable opponent to the Czech company in the Far East, but now, after five years of talks, Kobe has agreed to buy from Vitkovicke a single propeller shaft valued at 8 million Czech crowns.

Brenkus insists that despite the insignificant size of the order, both in terms of quantity and financial value, the deal nevertheless is of key importance. The Czech steel manufacturer hopes the contract will open the door for major sales to the Japanese giant's marine division.

Brenkus says that apart from its established reputation as a guarantee of quality, Vitkovicke as able to offer Kobe an attractive price for its product.

Vitkovicke specializes in the manufacture of propeller shafts to suit the power characteristics of two-stroke marine diesel engines. The Czechs have an eye to cornering the world market in this field. Typically, ships using such power plants are smaller ocean-going container vessels or large ferries, so the market around the world is a wide one. And business is helped by the fact that there is only one other major company which specialises in shafts for this size and type of powerplant, the Sidenor Reinosa shipyards based in Bilbao, Spain. The Czechs are therefore confident there's plenty of scope to expand their operations.

Last year saw something of a milestone for Vitkovitze, in that the company produced its 2,000th propeller shaft, which was sold to Poland's HCP shipyards located in Poznan.

During the same year Vitkovice produced a record 108 shafts, up 20 percent from its previous record set in 1978 when it turned out 83 examples. This year Brenkus expects that the company will turn out more than 130 pieces for clients in Europe and the Far East.

Aside from the HCP shipyards in Poland, European customers include Man BW Diesel of Denmark, which ordered 25 shafts last year. The DMW shipyards in Rostock, Germany, purchased 12 units in 1996, and the Uljarnik Pula shipyards in Croatia has been a steady customer, ordering 10 units on average per year.

During the past 3 or 4 years Vitkovice has been making inroads into the former Soviet Union, selling propeller shafts to Russia's Bryansk ship motorworks. That enterprise supplies marine two-stroke diesel engines to shipyards in Russia and the Ukraine.

According to Brenkus, the Czech company is filling the vacuum in Russia created by Japanese firms when they ceased to do business there due to payment problems. In his words, Vitkovice simply insists on 100 percent up front payment prior to making any deliveries to clients in Russia or the Ukraine, and the problem is resolved.

Apart from Asia, which is viewed as the area of major opportunity, sales are expected also to increase inside the former Soviet republics as well as Croatia.

(Jiri Kominek is a Prague-based writer who contributes to RFE/RL.)