Arad Municipal Roads Company Succumbs To Crisis

The Arad Municipal Roads Company (RADM), wholly owned by the Arad City Council, has filed for insolvency as a result of its incapacity to pay substantial overdue debts and the absence of any new contracts. The management of RADM has informed the Arad City Hall of the company"s status indicating that losses had reached 2.2 million RON by the end of 2008. The report to the City Hall also states that the company finalized in 2008 several contracts signed in late 2006 and early 2007, which did not stipulate any update to the contract value in order to reflect the increase in the price of raw materials, fuel, energy and services. Additionally, the road maintenance and repairs contract signed in early 2008 for the entire year did not include updated prices, but the prices used in the previous years, thus causing major losses to the company.

"As of March 2008, when the weather permitted the start of the works, the price of fuel and a number of raw materials has simply exploded. As some of the machine tools and transportation vehicles are morally and physically obsolete and the fuel consumption is two times more than what new machinery and vehicles require, the increase in the price of Diesel has had a major impact on our expense budget. Under these circumstances, the works performed in 2008 required very important additional costs, that eventually led to losses of 2,204,343 RON at the end of the year. The losses and the delayed collection in the payment due for the works prevented us from paying our suppliers at all or from paying them on time," said Caius Parpala, Managing Director of the Arad Municipal Roads Company.

In June 2009, E.ON Gaz suspended natural gas deliveries to RADM"s asphalt mixing plant in June as RADM had accumulated a total debt of 120,000 RON, of which 50% in 2008. As E.ON said that the payment of the debt was the only condition for resuming gas supplies, a number of almost-finished works cannot be completed. "The electricity and the water supply will probably be cut, too, because we do not have the funds to pay," Parpala added. RADM said the higher prices for bitumen, Diesel, gas and cement also converged to the current financial gridlock. According to the management, prices surged by 125% to 148%.

The Arad Municipal Roads Company was established in 1991 as a company of the Arad City Council. The start-up assets came from the Roads & Bridges Division of the former Arad Communal Administration.