Swedish Holmbergs files for insolvency of its Romanian subsidiary set up in 2020

Swedish group Holmbergs Safety Systems, controlled by investment fund FSN Capital – a major investment firm in northern Europe, has filed a request for the insolvency of its subsidiary in Romania, which it set up in 2020 by taking over Te Rox Prod from local entrepreneur Doina Cepalis with plans to turn it into a major production hub from where the products will reach the markets of Europe, the US, and Asia.

The Te Rox Prod was one of the most successful entrepreneurial businesses in Romania, set up in 2007 to produce child car seat covers and seat belts as a subcontractor for the French company Team Tex.

The company operates three factories, in Pascani, Roman, and Rugioasa, in northeastern Romania. The three units employed 430 in 2023, compared to over 700 during 2012-2019.

The insolvency request is filed in a context where, according to public data, the company's turnover dropped by one-third to EUR 9.9 million – the lowest level since its establishment in 2007-2008. Its profit halved last year to only EUR 84,000. However, the company has constantly posted profits over the 17 years of functioning.

Its turnover peaked at over EUR 20 million during 2013-2018 and was already dropping in 2019 before reaching EUR 14.5 million in 2020 at the time of the takeover.

Last month, the company explained its difficult situation, arguing that it has become increasingly difficult to be competitive, as energy, transport, and labor costs in Romania have increased exponentially in the last 4 years. Regulations and certifications in the market added more pressure.

But the company's officials, as quoted by Profit.ro, said that the company's activity is "stable."

"Indeed, the activity has decreased in recent years. The circumstances that led to the decrease in activity are, in fact, the capacity of the market in which we operate as well as other external factors. More precisely, until 2021, Te Rox worked exclusively for a single client from France, which in turn was sold to an investment group, and the approach of the new owners was much different than before,"company officials explained.

"In September 2023, the European legislation that our product is part of changed. This has forced our customers to modify but invest heavily in new product certification. The new legislation imposes certain aspects that, when translated into product development, increase manufacturing costs. The retailers, the ones who buy from our customers, have foreseen this and stocked up so as not to increase the prices to the consumer immediately, and then, in the negotiations, they have been very tough in maintaining the price. As mentioned above, our ability to be competitive on price has declined, and many retailers have preferred to turn to Asia for sourcing," they added.