Filtraglass
Banner

Owens-Illinois: Hungarian bottle factory closes, but Guardian Hunguard flat glass division performs well

27 May 1999: In 1998, Owens-Illinois, the US-based packaging company, closed a bottle factory in Sajoszentpeter in January this year due to the 1998 economic crisis in Russia. The bottle factory in Sa…

27 May 1999: In 1998, Owens-Illinois, the US-based packaging company, closed a bottle factory in Sajoszentpeter in January this year due to the 1998 economic crisis in Russia. The bottle factory in Sajoszentpeter, north-eastern Hungary was bought to add to its Hungarian United Glass (HUG) subsidiary. Like many glass factories in Hungary, the Sajoszentpeter plant was in need of modernization. Although efforts to make the plant viable had already begun, they were not sufficient to help it withstand the Russian crisis. The Sajoszentpeter closure leaves HUG with only one factory, bought in December 1995, in the south-eastern town of Oroshaza. It has to produce a full range of every size and colour of bottle. Sajoszentpeter had been bought in the hope of reducing wasteful, expensive production line changeovers. Although Owens-Illinois will not reveal HUG“s figures, it is thought to be among the group“s few lossmakers. The bottling industry, which produced 0.5% of Hungary“s GDP in 1997, has suffered from a lack of financial input. For HUG, the biggest buyers were food and wine companies, which still depended for 50% of their sales on Russia and Ukraine. That market evaporated last summer. In July 1997, barely 18 months after Owens-Illinois“ first investment, Hungary abolished import duty on bottles, making imports 13% cheaper. The Economy Ministry estimates around 30% of Hungary“s bottles are now imported compared to only 5% before. Demand has also been hit by a weight-based packaging tax which penalises glass use. Because the marginal extra cost of producing one bottle is low – the main cost is getting a production run going – Mr. Szoli believes importers are using Hungary to dump production. The Guardian Hunguard plant that stands next to HUG“s remaining bottle factory in Oroshaza has been more successful. It was established in 1988 as a 50-50 joint venture between the then state glass company, which was seeking technical and marketing expertise, and Guardian Glass. In 1997, Guardian Hunguard produced more than a quarter of Hungary“s Ft 40 billion (US$ 171 million) glass production. Now wholly owned by Guardian, Hunguard manufactures float glass and high-quality sheet glass produced by a horizontal method that reduces distortion. Guardian replaced the old plant at Oroshaza at a cost of US$ 120 million in 1991. The high quality of production from the new plant forced several competitors out of business. Guardian Hunguard made an operating profit of US$ 11.2 million in 1998, up from US$ 8.6 million in 1997, on sales of US$ 56.4 million, up from US$ 51.9 million. According to Lajos Sapi, managing director, the division is now one of Guardian“s most profitable. Such success, however, was not inevitable. The best markets were far away and the local gas had too few calories and had to be mixed with expensive butane. According to Mr. Sapi, specialization was the best way of solving this problem. Some of Hunguard“s production is now premium quality thin glass for picture framing which can be exported to Germany and Belgium.

Sign up for free to the glassOnline.com daily newsletter

Subscribe now to our daily newsletter for full coverage of everything you need to know about the world glass industry!

We don't send spam! Read our Privacy Policy for more information.

Share this article
Related news