X
    Categories: Uncategorized

Zsolnay owner accuses Pécs of trying to bankrupt company

Photo: MTI/Bea Kallos

‘I believe in the rule of law. I have a message for Hungarian citizens and businessmen: you do not have to be afraid, but you must expect the worst because that way you will not be surprised. . . . There is nothing worse than investors who are afraid to invest in their own country and, as a result, end up taking their money abroad.”

The following interview with the Syrian-born owner of the Zsolnay porcelain factory in the southern Hungarian city of Pécs appeared in the August 25 edition of the Hungarian business weekly Figyelő (pg. 9-11) under the title; “This is a mafia!”

  • “It is a miracle that we survived,” said Bachar Najari, majority owner of the Zsolnay Porcelain Manufacture, after the city of Pécs launched an attack against the company to try and force its liquidation.
  • The Syrian businessman with Swiss citizenship has harsh words for the city, as well as the new owner of a company set up by the city to take over the company’s activities.
    Najari has not given up, despite 120 employees leaving his company, and his company has continued operating with a staff of 50 workers.
  • The businessman says there are those in Pécs who now want to use the government’s anti-immigration campaign against him.

The Zsolnay Porcelain Manufacture issued a bold statement when it claimed that the “underhanded plot to steal the factory” had ended after the Zalaegerszeg Court dismissed the forced liquidation of the company. Is the plot to liquidate the company really over?

Yes, because we paid off our arrears just in time.

Who was the company referring to in the statement when it said that people “connected to politicians and businessmen initiated the liquidation”? Was it referring to the mayor of Pécs, Zsolt Páva?

You should ask him! But I would also like to know why now and what grounds he decided that Zsolnay was no longer solvent. The city formed a company, Ledina Kerámia Kft., and took Zsolnay workers after claiming that it would save the factory. This statement, which was issued by a lawyer that we hired, suggests the real goal of the city was to ruin me. Clearly, the mayor saw – because he had access to this information – that the factory was operating. Wouldn’t the decent thing to do to instead have told the employees that he lured away from the company – employees that we would rehire – that “everything is in order, you can go back to work”, and to compensate the rest of the workers for their loss of benefits after their employment with us ended?

How did this nasty issue get started?

Half a year ago, the mayor announced that Zsolnay is teetering on the verge of bankruptcy. We came out against him because clearly that wasn’t the case, and he knew that. The city is a minority shareholder in the company. The city has three representatives on the company’s board of directors and supervisory board, therefore the mayor had every opportunity to be convinced of the company’s situation. Despite this, he claimed that the company is on the verge of bankruptcy. This made it clear to us that the company would soon become the victim of a serious attack. So, we turned to the courts because, according to Hungarian law, minority shareholders in a company can be locked out of the company if it can be proven that they caused harm to the company — and this wasn’t the first time the mayor caused harm to the company.

By “declaring war” on the company?

They are the ones who said they are launching a war against the company, and I saw with my own eyes that they used everything they had. I think it is sadly unfortunate and strange that a municipality can wage war against investors. Why not keep disputes within the realm of legal forums if there is a dispute? Regardless, I see that instead of living peacefully with me, and beyond becoming focused on ruining me, the entire affair evolved to something that could ruin the Zsolnay tradition. They used every trick in the book and, in my opinion, this constitutes an abuse of power. Now, the city’s leaders are doing what they can to prevent the employees from coming back. They think that this would prevent the factory from being operational and maintaining production, and, according to this logic, would inevitably result in its failure. Luckily, the reality, is that this is not the case and that production is smoothly continuing.

What is the situation with Ledina Kerámia Kft., the company that the city no longer owns?

It would be worthwhile to research who the company was sold to behind closed doors, despite the company being an asset of the city, an asset that must be sold in an open bidding process. This, just like numerous other things, make up the attacks against Zsolnay that would otherwise be unacceptable in a country with a rule of law. Seeing as how Hungary, at least according to my own experiences until now, has a rule of law, the courts can still issue a professional ruling, and we will take the appropriate legal steps in this matter, too.

But why would anyone try to launch a “campaign to steal the factory”?

There are two reasons. In 2012, when the city announced it would sell the factory, the company had for many years booked losses of HUF 300-400 million. They rejoiced upon seeing that I had a vision for the company and assumed the burden of the company from the shoulders of the city. I immediately transferred hundreds of millions of forint into the company to make sure it could continue operating. But as the company started to improve, the city became more and more dissatisfied. Perhaps because they knew that later there would be very lucrative state-contracts to manufacture [ed.- Zsolnay’s famous] roofing tiles for the restoration of historical buildings. But the city only needed someone to operate the company for a few years, pump it full of millions of forint, and fail, just so that they could take it back when these orders would be placed. They did not expect that I would turn it into a successful company.

Successful? Last year the company booked losses of HUF 54 million.

By successful, I mean that I cut the company’s losses in half the first year. In the second year the company nearly broke even. All this happened without state subsidies, only by our own work, and branching into new markets. You can see for yourself, this is considered a success for any porcelain factory around the world.

But during this dispute, the government did not take the side of Zsolnay, it sided with the city of Pécs. Even Minister Overseeing the Office of the Prime Minister János Lázár said this.

I think [the city of Pécs] deliberately misinformed the government cabinet about Zsolnay’s situation. Despite Mr Lázár’s tough words, I feel like I owe the government some praise because the rule of law and its sustained operation is primarily to their credit.

Are you counting on further attacks? There is still an investigation into budgetary fraud.

The tax authority twice launched raids this year, but the prosecution service called both raids unlawful.

As the majority of owner of Zsolnay, are all arrears paid or are there still unpaid debts?

I have paid around HUF 600 million to satisfy various debts in the past few months, but I think that legally I would not have been required to pay so much. But even this served to bleed the company of its resources. The original development bank loan of HUF 130 million given to the company back more than a decade ago ballooned to almost HUF 400 million, and I even paid that off. The company also owed the city more than HUF 90 million. We settled that by paying off HUF 40 million in debt incurred while the city was the company owner. Later, the city asked for the company to become its strategic partner. In order to do that, the company had to pay that debt, so I paid it. Of course, they did not make this same demand of the company’s previous owners, only me.

How much money have you pumped in Zsolnay? Is there still enough money to keep it operating?

So far, I have paid more than HUF 1.5 billion. And it will not be easy in the future because the kind of damage that they have done to Zsolnay in the past 3-4 months is unlike any damage that has been done to the company since its creation, or even during communism when it was nationalized. They have scared the workers and lured them away.  They have damaged the brand and stirred uncertainty in the company’s partners.  And all this has closed certain important foreign markets to the business. We will soon be in the ninth month of this year and I have not been able to show any financial success for the company because I have doling out hundred of millions of forint.

Why haven’t the partners stood with Zsolnay? The porcelain is just as beautiful.

Three years ago, when we took over, my international connections had very high hopes. Now they are scared.  Not of me, but of the city. They ask me what guarantees there are that the city will not do this to me again, and they simply do not want to work with a partner operating under so much uncertainty. They are afraid that if they launch a Zsolnay brand store for USD 1-2 million, or invest EUR 3 million to launch a brand store in Dubai, that they might not receive the product. Our trading partner in Dubai suspended the construction of his store, just as our Canadian partner did, but both would have been operational this year. Our Slovakian trading partner has not ordered anything, and our importer in England has not ordered anything because of this news. Our exports have essentially disappeared because of the damage caused by the city’s campaign against us. It is obvious that they wanted to destroy us. When the mayor first said that the company is bankrupt, he was not telling the truth, but the city did everything to make that a reality. “Unknown individuals” set the tax authority on us, they closed our warehouses, they took our employees, and this scared our bank who withdrew its financing from us. It is a miracle that we survived, but I still say that we can profit after all this.

How?

The situation has become much more clear. Our employees and partners see that they have someone who will fight for them, someone who was willing to pay these debts. We have been visited by several diplomats recently, and we received a lot of encouragement and recognition. Numerous diplomats who knew nothing about Zsolnay have visited us recently and they are now closely following what is happening.

Obviously with reason, because if there are no workers then the manufacturing will stop. How can manufacturing continue without employees?

Almost 120 employees left the company, but 45 stayed. And we also hired more, so there are now 50 of us. We would like to hire several hundred more employees because my vision of establishing new markets from Miami to Dubai has not changed, but the timing of this plan has been slowed.

But Zsolnay can’t be produced by just anyone. Are the older employees with more experience not coming back?

Many want to come back, but they are afraid to. I did not see what kind of contract they were forced to sign, but I am afraid this is some kind of mafia. Who would pay HUF 3 million for a company with 120 employees, the majority of them without specialized training, while the company has tens of millions of forint in debt? That company has nothing, no work and no orders.

Zsolnay will be ruined without workers.

We are trying everything. We had an order scheduled to be delivered on August 20th when the company had 170 employees, but we were still able to deliver on August 10th with only 45 employees. The employees that have stayed are very enthusiastic and they even come in on weekends if they have to. Zsolnay’s survival is thanks to them — and I will never forget that. I will not abandon my plans, and we continue to move forward step by step, even if the factory’s situation has grown worse than expected.

Is there anything you learned from this?

When I bought the company, they investigated me very closely, but I did not adequately research the city of Pécs. Had I done so, I would have not purchased Zsolnay because the city had several huge scandals in the past that I have not seen elsewhere.

Are you thinking of the sale of the city’s water service and buses and the re-renting of these services?

These have created very bad vibes in the city. But I have lived in Hungary for 36 years, and they would be wrong to think that I would just put on my hat and leave, that I would not put another HUF 600 million to the factory, into this uncertainty. I did it because I believe in the rule of law. I have a message for Hungarian citizens and businessmen: you do not have to be afraid, but you must expect the worst because that way you will not be surprised.

That is a great message! In your opinion, after all this, is it worth it to invest in Hungary?

I am certain that what happened in Pécs could never have occurred in Switzerland, Germany, the UK. I hope that my story can serve as some kind of lesson for the country. Nothing like this should ever happen in Hungary.

When will there be peace in Pécs?

We have done everything to achieve this.  The rest is now in the hands of the city. It would also be good if the government paid closer attention to what is happening in the city, because all of this sends the wrong message to investors. After seeing what happened to me, many of my Hungarian friends told me that they, too, are afraid. There is nothing worse than investors who are afraid to invest in their own country and, as a result, end up taking their money abroad.

Do you see any connection between the attacks against you and the government’s own anti-refugee policies? You were born in Syria and came to Budapest to study high-rise construction.

I do not think there is any connection! But there are those in Pécs who are trying to use this connection.  But I do not care because our issue has to do with investments. I was very happy to see that, despite one or two comments, the media was not receptive to the opinion of the city of Pécs. I have been a citizen of Switzerland for 25 years, but I feel that I am Hungarian.  My wife and two of my four children were born in Hungary. I am more worried about Hungary, just like many Hungarians, and that is why I bought the factory I felt sorry.

Budapest Sentinel :