WEB EXCLUSIVE: Helping Iceland's construction industry
By Richard High21 January 2009
Iceland has been one the countries hardest hit by the credit crisis. Access International talks to Jon Geir Sigurbjornsson about the market and the progress of his company, Tolvur og kerfi ehf, which has been set up to support the country's equipment suppliers.
Iceland has been hit hard by the credit crunch. The collapse of the banking system has almost brought its construction sector to a complete standstill.
Many of the big projects that were on going are in danger of stopping or facing long delays. The Höfdatorg office and commercial district development in Reykjavik; a power plant at Hellisheidi; the East harbour concert hall and convention centre, due for completion next year, and an aluminium smelting plant at Helguvik all now face major delays.
A report by Credit Info Iceland said 3500 Icelandic companies will be declared bankrupt in 2009: meaning ever higher unemployment and big losses for manufacturers and suppliers to Icelandic companies.
Interest rates have reached record levels - 18% - and unemployment, nearly nonexistent a year ago, was 5.4% in December. The rot, however, started in October, when Iceland's banking sector collapsed under the strain of massive overseas debts.
Three major banks - Glitnir, Landsbanki and Kaupthing, collapsed after its currency lost 50% of its value, and all had to be nationalized. Reykjavik suffered the largest loss of any stock market in 2008 when its bourse lost 94% of its value. In November, the government negotiated emergency loans from the International Monetary Fund (IMF) and several of Iceland's Nordic neighbours.But the situation is still precarious.
With some construction still on going it is important to keep machines serviced so they will not be sent out of the country. Because the Icelandic currency has dropped 50% in value against all major currencies in the world, machinery export is a good business to be in.
"Tolvur og kerfi ehf can supply all kinds of machinery, trucks and material for export to Europe or to anywhere in the world," says Jon Geir Sigurbjornsson, owner and manager of the company.
"We have really good people working for us, lawyers and service people; we really have people for every job.
Tolvur og kerfi ehf, a privately owned company that specialises in helping construction equipment and materials suppliers reclaim their products from former dealers, or dealers that are facing real difficulties, has also been taking over temporary service and spare parts supply to existing customers in Iceland.
"We have been helping out companies like Liebherr, Bomag, Faresin and Niftylift with spare parts and service, as well as helping to find a good reliable company to take over dealership here in Iceland.
"Today we are a temporary agency for Bomag, Faresin and Niftylift. This is only to keep up the service for those manufacturers until the situation becomes more stable and a new dealer is found."
Mr Sigurbjornsson explains that Icelandic law does not discriminate in favour of foreign companies that have unpaid for merchandise on stock with Icelandic dealers.
"The fact is that most of the Icelandic companies have given the Icelandic banks full collateral in all merchandise on stock," he says. "That means if the companies go bankrupt, then the bank is the first to get the merchandise, the manufacturer gets nothing unless there are more assets than debts.
"It does not make any difference that the manufacturer has the title of the goods. If the Icelandic company has made a deal insuring debts with the banks, the title goes from the manufacture to the bank even though payment has not been made to the manufacturer.
"We have been helping companies to reclaim the stock merchandise before the companies go bankrupt. That is the only chance the manufacturer has to minimise the damage or loss."
Tolvur og kerfi ehf's web page details its services, in English, to foreign companies as well as carrying an online ordering system for spare parts for Icelandic customers www.vinnuvel.is .