PROCAM SRL - Who are we or How we see ourselves, as everybody sees different

Romanian dynamic companies

by Radu Tufan

PROCAM SRL - Who are we or How we see ourselves, as everybody sees different

Procam company began its activity in 1999 by a joint venture of the current company partners, the undersigned, Radu Tufan and Adrian Cioată, both engineers – one is a graduate of Electronics of Iaşi, the other is a TCM graduate in Cluj, in order to create a company producing precision mechanical parts machined by metal splintering, as well as parts for specific customers: the German industrial market. We had a reliable customer – an import-expert brokering company, led by a husband and wide (he was German, she was a Saxon originating of Sibiu).

We began our engineering career as interns appointed (last appointment was immediately after the Revolution) to a loom manufacturer in our city. There we met, we suffered cold and hunger, learned our trade, and got our passion for engineering. Those were the '90s. I worked as a commissioning engineer, and after a while, as electric/electronics designer, while Mr. Cioat` worked as programming engineer on digital machine tools, and later became head of department there.

Life separated us in ’93. I got into trading and minded my own business, although I was fed up with inspections, paperwork, authorizations, long and frequent drives. During this time, my colleague, Mr. Cioată, stayed at the factory for a long number of years.

How the business started

Years passed. At one point, I started looking for business ideas, but other than commerce. I took a subscription with Capital and Idei de Afaceri. I went to TIB a few times with Mr. Cioată, and he suggested to buy a used, Russian machine that was to be updated by an acquaintance of his (with an industrial computer and actuators from Hungary). I liked the idea. I’ve analyzed for a week or two and I said to myself that was a good start. So I started my manufacturing join venture with Mr. Cioată in April 1999, with his trading company.

We had lost the first opportunities, when good machines were bought for pennies, when one could take tools by the truckload, at junkyard prices, when you could buy entire pieces of the factory on the spot. We were lost in paperwork for a year and a half, with lawyers, notaries, authorizations, the Trade Register (the company was based in a different city), but once we started, things got in the straight line. Thus, in 2001, the company became Procam SRL, based in Târgu-Mureș, with the following business line: precision machining of metal parts. We rented a small hall from a factory with plenty of space available. In the meantime, we discovered that besides of the CNC cutter, we needed at least grinders, a lathe, a cutter, a drilling machine... We got a regular lathe and an old cutter and started restoring them on our own expense. In the meantime, the Russian machine was being rejuvenated. The man was doing that for the first time, on our money, on the first machine of that type being upgraded in our country. We were nervous, to put it mildly!

We took the machine into the hall, I hired the first worker, besides the two of us. After testing the machine, Mr. Cioat` brought the Germans to our company. They knew him from the factory, they knew what could do (at some point, he visited them in Germany too). Those were some strange Germans, at least for me! They would get in the loom factory where I used to work, watched and always asked: “Why this? Why do you use it like that? What does this do?”. We then learned they were doing the same with their German partners, then came back and learned the Romanians how Germans get things done. Since they came regularly to Romania, they began to know all the employees by name and skill level. After a long time, we found out they were at the beginning of their business, but had the advantage of knowing the Romanian industry and mentalities. And there was something else – the German way. Back then, Germans generally were apprehensive of the... far, red Eastern countries. Well, they managed to build a business that produced 1 or 2 truckloads of metal parts per week! And the business still endures today, albeit at a lower level. I will come back to them in my article, since for me and others they were a model of business people who combined professionalism, low labour costs in Romania and Romanian raw materials with German stringency.

So, let me go back: the Germans came, saw, wondered and gave us their confidence and ordered the first parts. We were a little lucky – those were cast aluminium parts, and the city had a neat aluminium foundry. We built the wooden moulds at a carpenter, had them cast in aluminium, machined them, had the gross aluminium parts cast, machined them again, and delivered the samples one week from receiving the design. It was a great effort, but was worth it: our customers became confident, we became handy with the parts. The money was not stellar, but it was a beginning where one could say: “this is the tunnel where we could see that little light after all’’. And there was something else – 15 day payment deadline. We had a very good turnover rate, even if the profit was not great.

We had other significant setbacks that could stop us in our tracks. We opened a bank account. The first foreign payment of 500 marks was 125 marks short. I asked for explanations from the Germans, they said it wasn’t them, sent us the bank papers – it wasn’t their fault. The bank could not explain where were the money. So we punished them and did not work with them for 10 years. After some years, when we had profit, turnover, all kinds of their fancy coefficients, they tried to lure us into becoming their customers again, but here’s another story, since working with banks/finances is my specialty and I have plenty to say.

I end the bank story here and go back to the Germans. I hope they don’t mind for calling them like that, but it’s easier for me. They were surprised, and probably seeing we were young and eager for work, and learned, they relied on us. They did well, since after a few years we were the only company in the region they could cooperate with and that complied with the price and quality requirements. Ten hard years followed, foreign customers did not go to small companies, we had a single customer that we depended on 99%, so the raw materials price increase was our only room for negotiation.

Step by step

Thus, slowly, we grew up as a company, increased our labour force, managed to buy a dilapidated hall – from the Tax Authority, in monthly payments for 4 years. The State was really helpful to us then. The price was so-so, the interest, again so-so, but we could pay if over a few years. It was a turning point, we managed to move from a rented place to our own hall. The energy provider dealt us a heavy blow, and charged us with a power fee that was almost the same price as the entire hall. And not in instalments, but in a single payment... We covered it, we installed doors, metal windows, painted it, put a heating barrel in the middle, made a fibreboard desk and went into business. The fact that we didn’t pay rent anymore became visible. We had even more space. In the old location, visitors would say they had never seen such a crowded place...

Years went by, we reached 15 employees (even 27 before the recession). The turnover increased when we made our own website. Then, the customers started coming. And especially Germans – the website was in Romanian and German. We started travelling in Europe to buy used machines. Let me tell you how we got used machines from a foreign company with a 3-year instalment plan. At some point, we were invited to the presentation of a foreign company at the Chamber of Commerce. We didn’t quite know what that was about, but we went. We already needed better, faster, more energy-efficient tools, we had demand of increasingly precise parts. Well, one Romanian man was translating what the company owner was saying, but he was speaking in French. They said what they were selling and where they came from, what was their tradition and manufacturing specialization, then invited us to dinner.

A good meal that was, I even remember my mouth watering at those food platters and the Cotnari wine. I remember this because I didn’t eat or drank anything. Everybody jumped at the food, but we directly to the owner and told him we were interested by some machines. We listened, they invited us to their company in Switzerland, showed a fee pictures sheets and told us they had around 2000 sqm filled with machines. I started from the very beginning by saying we only had money for a down-payment, but they told us to come anyway for we could surely find a way. And indeed, 2 weeks from then we arrived at their Swiss headquarter and go a contract for machines with 3 year payments. I then felt gratitude for my French teacher, and not just her. The Swiss saw we were serious, we could understand each other, and we closed the deal. Now, after 10 years, we bought another machine from them. Seen just a picture a data sheet. Paid with an advance and 2 instalments after delivery. You feel such a great satisfaction when you find honest people and when you realize your foreign partners feel the same!

Something that both my partner and I gained from the German family we were in business with for such a long time was that they taught us the German business mindset: seriousness, punctuality, swift communication of issues, long term business vision. So we learned something from the German way. But the price was dear... We worked for a small profit for years for that company. Neither I, not my partner regret it. What we learned in that period laid the basis for the long term development of the Procam business.

Today, we have 32 employees and reached 1 million euro turnover. And the profit, what can I say, for the last ten years we have been getting notifications about being the first in the country per NACE codes, or the third, or best profit... that we should go to Bucharest to shake hands with the President, or the Prime Minister, or to get some cup... But of course, the diplomas, the handshaking and the cup are all for a price, and we said to ourselves that true recognition comes from long term relationships with customers. So, we did not have any diplomas on walls, no cup on display and no picture with the President... For all the taxes we pay to the Romania State, they could as well do it for free. And here’s how I get to taxes – the pain of everyone working hard for 16 hours a day, no Saturdays, no Sundays, risking their homes and everything that can be mortgaged to get a business going. You should know that the tax is not 16%. It’s 16% + 16% (income tax + and dividend tax) + 24% VAT, + approx 66% social security contributions (33% the company, 33% employee) + City Hall taxes + energy fees + a zillion other fees I don’t even want to think about. Maybe taxes are not the bad part after all, what’s bad is to lose time to declare it. And we also lose money with those who count and take our money and income statements. Why don’t we make a single 100% tax. Just that. One tax, one income statement form, and send all those clerks to some actual work.

In 2008-2009, at the beginning of the recession, we had just bought two new DMG lathes. And then the recession came. 4-6 months with no orders. We hanged on, we cut auxiliary costs, production costs and emerged of the crisis unscathed, even with a profit. Over that period, we managed to apply twice the De Minimis program by the Romanian Government, and now we are currently implementing one EU-funded project for Information Technology and another for POS CCE – machine investments. We have some new, post-2008 machines: Citizen, Okuma, DMG, Victor, NCT, Mitutoyo, Kasto and other brands. In principle, our products are targeted at the European market. We have customers from Germany, Holland, Denmark, UK, Italy, Slovakia, the Czech Republic.

New challenges

The problems we are facing now are labour problems. We cannot find skilled workers who really know their trade. This is why we take students during their training periods, we hire university graduates and teach them at the workplace. Most of CNC machine operators have university degrees. We would be happy to hire graduates of vocational schools with little training, but there’s no such thing.... Maybe it would be better for the Universities to create vocational post-secondary, now that vocational schools are gone and engineering graduates are unemployed.

Now, there’s the advantage that German companies are relocating their Chinese factories. The Chinese become expensive and too far away. And the Germans are looking for suppliers close by. Close by road or by air. Western companies are at an advantage, since they have access to Western motorways and easily accessible airports. And of course, they have a long tradition in the field and qualified labour. We, the others, catch what is lost beyond the “border”, to joke a little. I spoke with a machine dealer at Demo Metal, who said that some foreigners still think of use as jungle people. He told me that he took that man to a plane parts factory, and he was shocked by our technology. The foreigners go wherever they could find labour and technology, although they prefer Western areas for the affordable transportation costs. What matters to them is to keep costs low and receive quality.

For the future, we wish to open new market niches, if there’s room for them – one high performance machine, better trained workers, and maybe, in a few years’ time, a new readymade building out of town, for better production organization and lower costs. 

Radu Tufan is S.C. PROCAM S.R.L. Administrator