I expect them to take our factory in Russia, says Chief Bran

You can also listen to the interview in audio version.

“This is the fifth deep crisis, but the worst I have ever experienced in these thirty years,” says Pavel Juříček, owner of the Brano Group, in an interview with Agenda SZ Business.

The production volume is decreasing, the material is running out, the costs are increasing and they cannot be passed on to the customers – i.e. the car manufacturers. And he accepts the fact that he will lose the factory in Russia, which will probably be confiscated, and write off ten million euros.

As he says, it has never been so bad, but it could be much worse. His company has already prepared a crisis scenario internally, which could arise after the gas cut to Europe and in which it expects a complete shutdown of the automotive industry for two to three months. As Juříček points out, even large and strong companies now have a huge problem, and that’s why he calls for support for small and medium-sized companies which, according to him, have no chance of surviving.

“We are already at operating zero. It is only through financial operations that we keep a small profit and take into account that as the Brano Group we were one of the most successful companies in the Republic Czech Republic and we’ve been rated among the top 200 suppliers in the world. It’s literally an avalanche. The dam broke and it’s literally a deluge of costs,” he adds.

How is your Branorus factory in Nizhny Novgorod, Russia currently operating? Still in production?

Basically it doesn’t produce, it’s such a rumble. Volkswagen and Skoda have so far exited the Russian market, although I received reports today that they plan to resume production in Kaluga and Nizhny Novgorod in early June. So far only a very unverified report.

What does scoop mean? What is the drop from normal production?

Today it is at the level of twenty percent compared to what was.

So you can’t completely stop production?

Not at all. I am bound by letters of appointment with car manufacturers (PSA and Renault) and in this case we cannot stop. If the automakers stop, we can stop, but we can’t afford it while they’re going. Such is the automotive world. It’s a little different from what politicians might want, but business is going the other way.

Confiscation? We are already counting on it, we will lose 10 million euros

How many people are there and have you reduced the number of employees?

Yes they have. Now they are down to 40 and they are on a diet – 20 people have 14 days unpaid leave and 20 people work and then they change. It is a cost minimization solution.

How real is the possibility of you losing the plant right now. That it will be confiscated?

The threat is real. As soon as we stop it completely and lay off a third of our employees, we can de facto count on it. And we are already counting on it, we will lose ten million euros in our assets. It’s like that.

Brano Group

  • It is one of the leading Czech manufacturers of automotive components, such as door locks, lifting equipment, shock absorbers and pedal systems.
  • The owner is Pavel Juříček, whom Forbes magazine ranked 46th in the list of the richest Czechs.
  • The group based in Hradec nad Moravicí in the Opava region has more than 2,000 employees in the Czech Republic.
  • Last year, the group reported a turnover of 6.6 billion crowns and a pre-tax profit of 400 million.

How can you accept it? How to prepare to write off 10 million euros?

You can see how I live it on my face. But now it’s not just about Russia. Everything else is written in our company – the lack of equipment, and I’m not just talking about oil and gas. I mean anything to do with it – vanadium, tantalum, niobium, palladium.

I haven’t had this for 30 years

You already mentioned it, it’s not only about war, but also about lack of chips, materials, covid… What is it like to be a supplier of the automotive industry right now?

I’ve been doing it for thirty years and I’ve never experienced what I’m experiencing now. This is the fifth deep crisis, but the worst I have ever known in thirty years.

It is often minimized in this form of impact on households. But what we experience in companies is much stronger and more dramatic. The price of gas has increased tenfold, our electricity is set at 205 euros and before covid it was 25 euros per megawatt hour. And the materials? Triple iron, plastics increased by fifty percent. It’s amazing what happened for three quarters of the year. The situation is catastrophic and dramatic. This cannot be solved by ordinary three-member corporations.

GM and Ford ask if we’ve gone crazy in Europe

Can these rising costs be passed on to the car manufacturers you supply?

At all. They won’t leave. Not yet. There are indications that a z zuschlag’ material will be tackled (surcharge – red remark.), which has historically always focused on iron or steel. We will see how car manufacturers will be ready to negotiate with us, how much “zuschlag” material they will be ready to accept.

So far, these are just a few positive signals, such as Suzuki or Toyota or Kia. These are car manufacturers who have agreed to adjust their prices, but this is relatively little compared to our portfolio. BMW and Daimler have done little, but the big players don’t want to talk about it.

We already write about the ever-increasing level of management in car buying structures. They just have their numbers and their ideas.

On the other hand, marry Americans. GM, Ford wonder what’s going on here in Europe. They have electricity for 110 dollars per megawatt hour, or about 95 euros, and therefore half of what there is in Europe. They have gas at the original level. They tell us – what are you crazy about in Europe?

The dam broke. These are cost floods

So how much have your costs gone up now and how much have your margins gone down?

We are already at operating zero. Only through financial operations do we keep a small profit and take into account that as the Brano Group we were one of the most successful companies in the Czech Republic. We have been ranked among the 200 most successful suppliers in the world.

It’s literally an avalanche. The dam has burst and it’s literally a flood of costs.

This is how the production of automotive components is carried out at the Brano enterprise (Video: Zuzana Hodková, News List)

How will this affect your economy? Last year, you had revenue of 6.6 billion and a profit of 400 million…

We were already de facto zero in February and March, as I see it very fresh, will look the same. And now, since April 1, another avalanche of rising prices has hit us as manufacturers, so I don’t see it in a positive light at all.

And if a completely catastrophic situation arose – if Putin turned off the gas as he threatened – I could no longer imagine that the Czech Republic would survive. In fact, not even Europe, although some are much less dependent on it than the Czech Republic.

Putin considers that he wants to harm Europe as much as possible. For him, we are the biggest enemies and for the terrible things he is doing there under the guise of denazification… I think Goebbels should also learn how he can manipulate and distort the Russian media.

All this is reflected in activities like the automobile, which is very global. These are the sources, consider that 90% of neon is produced in Ukraine. When it’s not neon, you’re not firing lasers. When you don’t have lasers, you don’t make a lot of electronics. The world has simply become so globalized that even without Russia, which is so toxic, it could sooner or later stop.

Black writing? Stop for two to three months

So this is the worst ever, but it could be much worse?

Basically yes. We are currently working on such a scenario – if the automotive industry stops for two to three months. We are preparing a study so that we will not be surprised if Putin stops the gas supply. It is clear that then households would become a priority.

We project that of the five billion Brano now earns across the group, we would drop to around three and a half billion. You will bear the fixed costs, but you will not have any turnover.

Would this have an impact on employment?

In principle too. We now have 147 refugees to take care of and we already employ 70 of them. But now we have suspended the recruitment of more staff from this refugee section. We would then work very carefully with the agencies, which we also have a lot of.

How can small suppliers survive the situation?

I can’t imagine that. We will certainly survive. I have always thought about the rear wheels and I have a financial pillow. I can’t imagine how it could have happened… That’s why I tried to contact the Minister of Finance to investigate. We must help small and medium-sized enterprises in particular. There are different aid scenarios, for example via the modernization fund or via the flipping of the allowances. Continuity is needed here.

I have never been pro-business. On the contrary, my basic premise was not to enter into the business situation. But now I see that if the government does not find a solution, I cannot imagine that small and medium enterprises will survive.

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