VZCZCXRO2543
RR RUEHIK
DE RUEHBM #0825/01 3441216
ZNR UUUUU ZZH
R 101216Z DEC 09
FM AMEMBASSY BUCHAREST
TO RUEHC/SECSTATE WASHDC 0154
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RHMCSUU/DEPT OF ENERGY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS SECTION 01 OF 02 BUCHAREST 000825 
 
SENSITIVE 
 
DEPT FOR EUR/CE ASCHIEBE 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EINV ENRG ECON PGOV RO
SUBJECT: INVESTING IN ROMANIA: CAPITAL OR LABOR? 
 
BUCHAREST 00000825  001.2 OF 002 
 
 
Sensitive but Unclassified; not for Internet distribution. 
 
¶1.  (SBU) EconOff's recent visit to two American investors, oil 
drilling and pumping equipment manufacturer Cameron and fuel 
injection manufacturer Mefin Sinaia (owned by U.S.-based Walbridge 
Partners), revealed two very different manufacturing styles. 
Cameron's greenfield investment in a state-of-the art manufacturing 
facility in Ploiesti stood in jarring contrast to Walbridge's older 
Mefin Sinaia plant.  While Walbridge invested only a few million 
dollars in a previously state-run factory that was being privatized, 
Cameron started fresh, pouring much larger sums into their plant. 
The juxtaposition of the two facilities offers a stark contrast 
between foreign investment designed to take advantage of cheap labor 
and investment aimed at a labor force with a high level of technical 
skill.  As a general rule, Romania welcomes large capital 
investments.  There is, however, more willingness to push harder for 
investments which will preserve jobs, than for those that focus on 
high technology production. 
¶2.  (SBU) Cameron chose Romania as its base for expanding business 
eastward because of the country's strategic location, available 
space in an industrial park, and skilled personnel.  The company is 
export-oriented, sending 90 percent of production to the U.S., 
Europe, Africa, and countries of the former Soviet Union.  The 80 
million USD facility employs the most modern manufacturing 
techniques and a technology-savvy workforce.  The factory itself was 
in pristine condition and the few workers that EconOff observed were 
either moving heavily machined parts between room-sized machines, or 
operating computer displays in front of the same machines.  The 
entire factory is automated and Cameron proudly showed off a tool 
facility that, through the use of computer chips and readers, was 
able to ensure that the right tools were at the right machine at the 
very moment they were needed.  Even the in-factory delivery system 
relies on wheeled robots run by remote control. 
 
¶3.  (SBU) Inside a newly-built industrial park some 40 km north of 
Bucharest, Cameron noted that while they were generally pleased with 
the location, the road and power upgrades promised by Romanian 
authorities had lagged behind, forcing Cameron to spend additional 
money to ensure the facility would be ready to open on time. 
Cameron's presence led at least three of their suppliers to open 
facilities in the same park, ensuring next-day delivery for 
essential inputs.  Because Cameron offers a high-value-added 
product, the high cost of shipping products from Romania is less of 
a concern.  In dealing with the labor union, Cameron Director 
General Marius Tripsa stated that other investors should be aware 
that the Romanian labor code is sometimes complicated, involving 
overlapping legislation at various levels, making a working 
relationship with the local union vital. 
 
¶4.  (SBU) In contrast to Cameron, Walbridge determined that it made 
more sense to take advantage of an existing facility, which 
maintained a workforce already skilled at making fuel injection 
equipment.  While staffing at Mefin Sinaia has fallen significantly 
from the 4,000 employees when privatized in 2003, the factory's 
aging design makes production much more labor- intensive.  Machining 
is still being done on Communist-era equipment, resulting in an 
energy- and water-intensive production process.  The factory's 
continued success depends on both being able to adjust quickly to 
changing production demands and the ability to keep wages 
competitive.  According to Plant Manager Valentin Barba, the 
company's in-house engineering staff is capable of quickly designing 
custom parts, while the abundance of existing manufacturing 
equipment means finding the right tool to do the work is relatively 
easy.  At the same time, the old equipment base imposes costs on 
Mefin because they have to fabricate their own tools and perform 
their own maintenance in-house.  To offset the disadvantage of 
obsolete technology, Walbridge has invested two million USD and 
implemented lean manufacturing techniques to increase worker 
productivity, with some success.  The downturn in the automotive 
industry, and closure of the Romanian vehicle manufacturers Aro, 
Roman, and Tractorul, have all hurt Mefin.  The company, however, 
hopes that the arrival of Ford and associated parts suppliers in 
Romania will create new opportunities that it will be able to 
exploit.  Barba characterized the relationship with the factory 
union as generally acceptable, but he did say that particular shop 
stewards had proven difficult in the past. 
 
¶5.  (SBU) The two plants are textbook examples that size and 
financial might matter greatly when investing in Romania.  Large, 
financially strong companies have the money to invest up front and 
to cover unexpected costs such as land decontamination or investment 
in power infrastructure, both of which were surprises for Cameron. 
They can hire consultancy companies and lobby more successfully with 
the local and central governments to navigate their way through the 
sometimes murky and overlapping Romanian rules and jurisdictions. 
Smaller foreign investors, while they can carve out profitable 
niches, have a harder time resolving bureaucracy and infrastructure 
 
BUCHAREST 00000825  002.2 OF 002 
 
 
problems, both of which impose additional costs.  At the same time, 
investing in an existing plant means there are fewer zoning and 
infrastructure issues, making it easier to gear up manufacturing in 
a hurry.  While Mefin Sinaia has found a business niche for itself, 
it has faced a number of headaches due to the labor force and old 
machinery it inherited from a state-owned company.  Both 
manufacturers, however, remain bullish on Romania's future growth 
prospects.  For other foreign investors, Romania's skilled yet 
low-cost labor force remains an ongoing draw. 
 
GITENSTEIN