Branislav Livaić: Ferometal’s Machining Stalls Due to Lack of Skilled Workers

Branislav Livaić is a conservative entrepreneur who is not prone to large business risks or making plans without coverage. He does not want to rush into large investments or take out large loans that might be difficult to repay, but rather takes it step by step. His company Ferometal employs, produces, exports, and grows, is liquid, and pays salaries. With a conservative business philosophy, Livaić has created a machining and surface protection company that today employs 15 people in the suburban area of Veliko Polje in Zagreb and has never faced difficulties in its 15 years of existence. He plans to retire soon and is preparing his son Goran to take over the successful and stable company.

>>>Using the TutoTod application, Antonija Horak connects children and parents in joint creative activities

– We are continuously growing and have made a profit every year since our founding, sometimes larger, sometimes smaller, and we have never owed anyone. We regularly pay salaries that are among the highest in the industry, perhaps even too high compared to the competition. It is currently difficult for me to talk about further growth because we are limited by space, but in the medium term, we plan to purchase land and build new facilities. We are considering options for expansion, but it is an investment of about five million kuna, which we cannot afford from our own funds, and to make such a leap, we would need to apply for non-refundable funds from EU funds. It would be a shame not to take advantage of the money that is offered, and that is in our plans. I believe my son will try to achieve that goal, and my wish is to retire and be of help as much as I can. The market pressure is enormous; we work in three shifts, on Saturdays, Sundays, and holidays, and we barely keep up – says Livaić.

>>>Vladimir Tomaić: Problems for Runolist began with the placement of cheese on the shelves of retail chains

So far, Ferometal has applied for funds from the Ministry of Entrepreneurship, and a project worth about 300 thousand kuna has passed the first round of the competition. With these incentive funds, they plan to expand the metal surface protection facility, which has become a bottleneck as the workload increases every day.

Expansion with European money

In addition to the lack of space in the inadequate ground floor of the family house, Ferometal also struggles to find skilled and quality labor, especially for the machining segment, where they are less successful due to the lack of specialized personnel than in metal surface protection.

– The labor market lacks CNC machine operators, skilled people who know the technology and work regime. Finding a quality person is a long process. If there were enough such people, it would not be a problem to find new jobs, nor would there be any barriers to further hiring. Our workforce is a crucial problem; we need people who know and want to work, regardless of the large number of unemployed in Croatia. The metal industry lacks people; we are no less deficient in personnel than construction or tourism. This is a limiting factor for increasing production and exports. Today it is a problem, and tomorrow it will be even bigger. Machining is stalling due to the workforce. It is not enough to make a product of high quality; it must also be made quickly enough to be competitive; that is the whole wisdom. If we were as successful in machining as we are in metal surface protection, we would already have a clear plan for a bigger leap, but now we have to wait a bit. Some people who worked for us are now retired, and others who spent about ten years at Ferometal have gone to Germany. We have ongoing training, however, you must understand that this is not a job that can be learned in three months. Finding a quality person is a long process – laments this experienced entrepreneur about the state of the labor market, which is becoming an increasingly significant problem.

The cheapest is not always the best

In such challenging business conditions, achieving productivity and being competitive in the European market, where competition in this industry is abundant, is a key challenge. There is work, and it is not a problem to find it, but to be competitive and even get the opportunity to contract work, they are forced to lower prices. The market is such, competition is fierce, take it or leave it.

>>>Jurica Veselić: Sloga Podravska builds growth on small shops and known customers

– If you lower prices enough, you have as much work as you want. It is difficult for us to get into a situation where we directly offer work, so we work through intermediaries who contract jobs for end customers. They have dozens of cooperators like us, they make offers in multiple places, and the job goes to the one who offers the lowest price. Perhaps some of them have realized over time that the cheapest solution is not always the best and are trying to find some balance between price and quality. We plan to explore opportunities to directly obtain jobs in Germany and Austria, to be first with potential customers, so we no longer go through intermediaries. This way, everyone takes their percentage, sometimes there are even more intermediaries, and then for us who produce, only a small part of the pie remains. You must be as rational and productive as possible. You work, but practically groan under the burden of various costs – admits Livaić, whose Ferometal achieved an annual profit of about 140 thousand kuna on a revenue of about 3.5 million kuna. They occasionally have problems with collecting receivables and with lengthy court disputes in which they try to recover debts, and there have been cases where even after winning lawsuits, they were unable to collect for the work they completed. Since they started operating, they have thus lost almost half a million kuna earned.

>>>Perak and Matijaca: A globally successful company started with a loan of 26,000 kuna

– When you are a small company and someone owes you a large amount, you get into trouble. Fortunately, we have successfully overcome all that, but if we had managed to collect for the work we completed, we would today have money for further expansion. All this creates conditions in which you cannot breathe fully and develop. Even today, we have certain difficulties with collections. We are just about to send a letter to a partner in Romania, a company that operates worldwide, that we will suspend production until we collect receivables. It is incomparably easier to do business if you have solid partners when there is mutual trust – warns Livaić about the enormous problem that, besides Croatia, evidently troubles some other transitional economies as well.

All in export

In addition to Romania, Ferometal also exports to Switzerland and Sweden. They directly export about 15 percent of their production, but actually, almost all of their production ends up in export through the final products of their partners. Among reliable and recognized partners, they have collaborated, among others, with the Karlovac weapon manufacturer HS Produkt, producing targets and some parts of automatic rifles for them, with Rimac Automobili for which they manufactured smaller parts of electric cars and performed anodizing services, with Dalekovod and the Institute for Nuclear Technology.

>>>Nikola Rakić: Two years are invested in the production of prosciutto before one starts earning

Machining involves the production of highly demanding machine parts from aluminum and steel alloys and polymers, on CNC machines and classical tool machines for turning and grinding. Metal surface protection includes anodizing aluminum and bluing steel. Anodizing is an electrochemical process that forms a protective layer of oxide on the surface of aluminum that has anti-corrosive and anti-abrasive functions, while bluing is a chemical conversion process of the steel surface that creates a layer of magnetite – black iron oxide that ensures resistance to corrosion.