Think Railways

Change is the only constant in the top management of the Romanian state-owned railway companies. It is a harsh reality impacting on their performance and the trust of their business partners. However, recruiting firms, with contracts totaling over half a million EUR, do not complain.

Starting with 2011, IMF pushed Romania to appoint “private management” at several state owned companies, including the railway ones. Last year, IMF chief negotiator for Romania Andrea Schaechter, considered necessary to strongly advise the ministries in charge not to interfere with the selected management.

Since 2012, each of the three state owned railway companies had at least two different general directors. The first private manager selected for CFR SA  stepped down from the GM job, just after 3 months of activity. He pointed out the despair of the political factor not to lose control of the company and the available EU funding. CFR SA is currently searching for new candidates to take up the GM role. More information about the job is available at this link: http://www.cfr.ro/index.php/ct-menu-item-3/ct-menu-item-77/29-articles/1873-anunturi-recrutare-management-privat (only available in Romanian language).

CFR Marfa, the freight operator, will soon follow in the selection process, since yesterday, the GM appointed just a month ago, announced his resigning. He might have been considered "too private", taking into account that his career so far was shaped in companies owned by Cristian Burci, former owner of International Railway Systems (“IRS”), manufacturer of freight railcars and Servtrans, rail freight operator.

According to UIC statistic, CFR Marfa registered a 10% decrease in the volume of freight traffic in 2013 and a turnover of EUR 208 million. In the EU Balance of Payments assistance programme report published in January this year it is mentioned that the aim is now to privatise the company by May 2015, based on a more realistic time schedule. In the meantime, CFR Marfa shall eliminate operational losses through the sale of obsolete freight wagons, reduction in personnel costs and by halting delivery to customers with arrears. The future GM will have to gracefully handle laying off 2500 employees. This number could reduce to 1500, should IMF accept the derogation request the Romanian ministry of transport intents to submit in regarding the agreed layoffs.

CFR Calatori, the passenger operator, seems to be the most challenging company to manage since the skills and competences of the private manager, appointed in January 2013, were not enough to achieve the company’s success. A directorate of three general managers was recently put in place, two of them being  political appointees. As many consider, the double-envelopment tactic was meant put the selected GM out of action. Last year CFR Calatori’s passenger traffic dropped by 15 % y.o.y, to approximately 48 million. However, in the first three months of this year, the company carried 1.7 million more passengers compared to the same period in 2013. But this could be one of the consequences of the ticket control intensification activities started in mid 2012.

It seems that in spite of the legislation that requires professional management in state-owned companies, the Romanian government prefers imposing managers selected rather on political criteria. These companies are passing thought a crisis period and actually need a long-term strategic vision and GMs managing with responsibility. Establishing as common interest the achievement of profitability targets by both the public politics and the private manager is the missing ingredient in resisting at least one year in the top management of Romania’s national railway companies.