When Electrolux, the Swedish white-goods maker, took over Hungary’s state-owned Lehel refrigerator factory in 1991, the first decision for the newly appointed chief executive was to choose the name of a tiger cub, born recently in the local zoo.

“Lehel owned many assets in the area, including a hotel, sports facilities, and the zoo,” says Janos Takacs, regional chief administrative officer for Electrolux Eastern Europe. “The animals had to be named and entered into the accounts. Mind you, the zoo was one of the first things the company sold, or rather, transferred, to the local [Jaszbereny] community.”

Thus was the somewhat quirky beginning of arguably one of the most successful privatisation deals in central and eastern Europe.

However, downsizing the inventory of wild cats was far from the only change needed at the central Hungarian plant, which then boasted a workforce of almost 4,600.

“Of these, some 1,000 were white collar workers, and fewer than 2,000 were directly involved in production; this was a reflection of the [former communist-era] policy to maintain full employment,” says Mr Takacs.

Worse still, despite the bloated office headcount, just two people spoke English, while modern marketing, logistics, accounting and financial skills were notable for their absence.

Despite this, Lehel workers produced 600,000 refrigerators annually, of which a third were exported to western markets. “We’d been around since 1952, and Lehel had a technical culture and experience,” he notes.

Restructuring saw the total headcount dip below 3,000 by 1994, as the new owners initiated sweeping retraining programmes, and introduced new technology, production systems and product lines, while simultaneously undertaking a huge environmental clean–up – a requirement of the privatisation contract.

“The Lehel acquisition was the first 100 per cent takeover of a big state-owned company in Hungary. This was a show of trust and courage, because at the time [just one year into the new democracy] there were financial and political risks,” says Mr Takacs.

As the company transformation progressed, Electrolux management increasingly warmed to its Hungarian subsidiary, introducing important new products, such as chest freezers in 1997 and vacuum cleaners in 1998 – despite suffering a serious fire in a refrigerator production unit that same year.

At the same time, Hungarian specialists were busy transferring their new skills and know-how to a freshly acquired cooker production facility in Satu Mare, just over the border in Romania.

More significant still, Electrolux decided in 2003 to develop a greenfield plant at Nyiregyhaza in north-eastern Hungary, to produce a new range of fridge-freezers.

Not that the expansion came easily. “We had to lobby hard for this; there was fierce competition,” Mr Takacs says. The new plant, an investment of some €85m ($112m), opened in 2005.

The result today is a workforce across the two Hungarian sites of 4,000, including 3,500 blue-collar workers. The factories produce 5m units a year, ranging from vacuum cleaners to built-in refrigerators.

As for the investment environment, Electrolux, as a manufacturer, is not directly affected by government moves to impose special taxes on banks, utilities and large retailers. He is, however, sceptical of promises that the extra charges will not be passed on. “Sooner or later, these costs will reach the final customer,” he says.

However, Mr Takacs remains optimistic, and proud of “the loyal workforce”, a result of Electrolux’s policy of “trusting Hungarians” and retraining rather than making wholesale dismissals.

Jozsef Csibra, a workshop leader in one production unit, appears to epitomise this policy. An employee of 15 year’s standing, including a stint with Electrolux in China, he says: “My grandfather, father and now I work here; three generations all told.”

Get alerts on Mergers & Acquisitions when a new story is published

Copyright The Financial Times Limited 2019. All rights reserved.
Reuse this content (opens in new window)

Comments have not been enabled for this article.

Follow the topics in this article