issue: April 2009 APPLIANCE Magazine
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by Paul Roggema, Europe correspondent
ON LOCATION: APPLIANCE magazine was in Bosnia to visit refrigerator maker Bira, where an entrepreneurial spirit brought the factory back to life after a devastating civil war.
It happened in Bihac, about 150 km from the Adriatic coast in Bosnia-Herzegovina. Bosnian refrigerator maker Bira had been part of Gorenje Group from 1985 to 1992. The Slovenian conglomerate, which began exporting to Germany as early as 1961, was one of the few companies from communist countries that could compete in Western markets.
Then came the Bosnian War in 1992, devastating the country and its economy. When war ended in 1995, all that was left of a once-flourishing refrigerator factory was a damaged and empty manufacturing hall and a group of determined workers with few other employment options. Gorenje had shifted its focus to Serbia. Bira had almost no manufacturing equipment, no money, no products, and no revenue.
"The only thing we had was the simple decision that we would not accept a closure of the factory," related Faruk Hadzipasic, general manager. "Myself, the technical director, Mr. Muslic, and a group of highly skilled and motivated workers agreed that we would do everything it would take. Of course I never expected us to survive, so overwhelming were all the problems. We had nothing!"
Hadzipasic describes the situation as total chaos when the group attempted to restart the operation with no communication, transportation, or banking system.
"Workers would ask me what to do in an empty factory and I simply suggested they reconstruct the factory, remove the bullet holes, and start painting," he says. "At one time we even rented out space to the UN."
When the war ended in 1995, the group was still government owned and knew that a key to its success would be simply to resume production, no matter how small the scale. "We scraped all the pieces together," Hadzipasic says, and by 1997 the plant managed to produce 30,000 units.
"We then knew we wanted to be privatized in full Western style, to be able to compete in the European marketplace," Hadzipasic says. But the company had witnessed other firms endure the pre-privatization phase, which could last as long as five years. "Around us we saw how not to do it: a slow process, with a killing insecurity and no room for strong decisions."
Bira leadership knew the prolonged process could not work for the company, so they determined to speed up the process, which happened in the 2002-2004 timeframe.
"We prepared for a fast privatization, by fixing all the buildings and the installations with minimal investments. We were able to make clear that we were striving for international standards," he explains. "Despite all the preparations, when the final tender came, nobody was interested. They simply did not believe that we could do it."
Foaming of door panels. The machine can process eight doors at a time.
But someone on the outside did see potential in the reincarnated fridge factory. It was Selver Oruc, owner of Robot Group, a Bosnian trading and manufacturing conglomerate. Robot includes business for auto parts and accessories, consumer electronics, electrical and electronics products, lighting, and office supplies.
"We told Mr. Oruc how we started production with almost no resources: we collected money from all sides," Hadzipasic explains. "He recognized that we had a group of people that would do everything to succeed."
Oruc bought the factory for €7 million and invested an additional €15 million.
"We were very happy with his intention: to resume production and keep the staff," Hadzipasic says. "We could build an all-new factory, totally according to EU standards."
Oruc earned the respect of plant employees. "In our company the salaries are always paid on time; so are the taxes and health insurance premiums. That is quite unusual in this region," explains Hadzipasic. Salaries are lower here than in other European countries. "But our workers are dedicated. It is no problem to come in on Saturday in the summertime when demand is high.
"Now, life still has its challenges—dealing with the globalization is quite tough," Hadzipasic admits. "But we realize quite well that it does not involve shooting."
Some new expertise was called for on the marketing front, and the company brought in Enver Dupanovic to serve as marketing director.
"We have three main market segments: exporting to the former Yugoslavia under the Bira brand name; production for our strategic partners Electrolux, Antonio Merloni, and Sideme; and production for several European retailers," Dupanovic explains. "When we started testing the markets, we were surprised that we were so well-received. It helped that we passed all kinds of audits and we have all certificates."
Serbia, with 10 million consumers, is an important focus for the company. "Despite all the war troubles, there is still money there," Dupanovic says. "Through the Bira brand we sell 50-60 K units, and we will continue building this brand."
The company has a staff of about 600 today, and produces 250,000 to 300,000 units per year. "However, the capacity of the factory is around 600K," Dupanovic says, "We do have to compete for workers, as many go to larger European countries where wages are higher."
Rebuilding a Factory, Engineering New Products
Edin Muslic is Bira's technical director and is credited as being the leader of the rebuilding project. "After the war, we basically started from scratch, with an empty factory," Muslic relates. "This was quite a challenge, because we did not have the budgets that our competitors have."
He says the company managed to rebuild the plant on about half the normal European budget. "We carefully selected a mix of European and Chinese tools; you have to remember that a European (Italian or German) machine can cost as much as three times a Chinese machine. For a few quality-critical machines we went for the top product." In other cases, they combined products to get the manufacturing capabilities they wanted while staying within budget. Panel forming, for example, happens on Chinese-sourced machines with Siemens control units and software.
"Expensive metal stamping presses were replaced by cutting, and forming is done with wheels rather than pressing," Muslic explains. "We have just a few robots as labor is cheap here."
At the beginning of its restart, Bira manufactured the existing refrigerator models from the pre-war days. "Gradually we changed to new designs, in cooperation with the technical university of Bihac," Muslic explains. "Now all products are A-class and we have all the necessary certificates and quality labels for the products as well as for the production technology."
The company does its own injection molding, unlike most others in the industry, because of a lack of supplier infrastructure in the vicinity. "This gives us full flexibility to deliver all kinds of designs for our OEMs," he says. "Currently our models have a distinctive shape, but we are working on more neutral versions." The company uses mostly Chinese-sourced compressors but can switch to other components as-needed.
Powder painting happens in paint booths from Swiss manufacturer ITW Gema. The powder paint uses no solvent and has little waste—like all such systems, the booth reclaims and re-uses powder that doesn't adhere to the product on first pass.
The refrigerator insulation is foamed using an ozone-friendly cyclopentane blowing agent. The refrigerant is R-600 (n-butane), a hydrocarbon that is also considered environmentally friendly.
The plant has two assembly lines, one for units less than 140 cm and the other for larger cabinets. The machine for door foaming holds eight doors at once, but Muslic still calls it the bottleneck of both production lines. "It has a 8-min cycle time. The filing station reads the bar code to determine the gas quantity. We use ultrasonic soldering and closing." The final stage of assembly is testing, with 100% leak and functional testing as well as a visual check.
"We have an extensive quality manual where all methods are described, including visual examples and detailed error margins," he explains. "The whole process is so strict that we can achieve a 30% lower failure rate than our key customers in their own factories—of which we are very proud of course. Our service call rate is about half of the industry standard."
Dupanovic says the current goal is to double production in the next 2-3 years. He hopes to achieve this with current partners, as they continue to outsource. Its product quality performance will certainly help propel Bira toward its goal. Not bad for a company that was once nearly destroyed by war.