With Poland’s economy in its worst stall since 2001, Zdzisław Polański, 64, is betting the farm at an age when most entrepreneurs are thinking about calling it quits. He’s planning to invest $10.3 million—about four times his annual sales—to build a new food packaging plant alongside the 1970s prefab facility he leases in a forest near Warsaw. Sixty percent of the funding comes from a European Union loan. A new production line, chemical and microbiology labs, and equipment for making and testing coatings and inks are Polański’s answer to sales that haven’t regained 2008 levels and the squeeze retailers have put on his customers for price cuts.
“If I don’t do this, there’s no chance for the company to survive,” says Polański, a lieutenant colonel in the communist-era air force, who took over his wife’s wrapping-paper business in the post-transition slump of 1990-1991. He also weathered the 1998 ruble crash that wiped out exports to Russia along with half the sales of his company, Arso-Polański. “I think I’ll manage, but I’m not feeling complacent.”
The resilience of small and midsize manufacturers such as Polański—counterparts to the German Mittelstand companies with which many do business—is the one bright spot in Polish industry as the euro area endures its second prolonged recession since 2008. Exports are the only reason the economy grew in the fourth quarter, and they’re still expanding 7.5 percent in dollar terms in the first quarter of 2013.
Small and midsize enterprises are taking the lead, as 48,000 Polish companies employing from 9 to 250 boosted exports 13 percent last year, almost double the gain by bigger companies, says Radosław Bodys, chief economist at PKO Bank Polski. “Poland’s strength is that it’s a big, dispersed economy with lots of small manufacturers. That means diversification and increases resistance to shocks,” he says. “Compare that with Slovakia, where 90 percent of the exports are from the top 20 firms, 19 of which are foreign.”
Amica Wronki, a kitchen range and oven maker, had its own near-death experience in 2008, when the banks suddenly shut off financing to its distributors. Amica’s sales dropped 80 percent, leaving it “weeks away from bankruptcy,” says Marcin Bilik, vice president of operations. Amica sold its washing machine and refrigerator businesses and focused on building up its brands abroad, especially its Hansa line of white goods in Russia. Tough cost controls and a decision to keep as much manufacturing as possible in-house helped Amica achieve efficiencies comparable to Samsung Electronics and Bosch & Siemens Household Appliances, Bilik says.
Amica’s decision to make almost all parts itself cut off local suppliers like Gelg, a sheet metal processor started by Grzegorz Grupiński. The 62-year-old engineer scrambled to fill the gap with new products such as refinery cooling towers. Gelg employs 220 in a sprawl of corrugated metal sheds that house laser cutters, welders, stamping machines, and hydraulic presses turning out everything from gaskets to auto parts. Sales will grow “significantly” this year due to orders from Sweden’s sealant manufacturer Trelleborg, Volvo Construction Equipment, and Samsung.
If there’s a reason to worry, it’s that so much of Poland’s prospects still rely on 60-somethings such as Grupiński and Polański. Their skills evoke the premium placed on engineering in communist-era education, which had a lot in common with Mittelstand craft traditions. “Polish companies in the 1970s were run by engineers, and they had a lot of fantastic procedures,” Polański says. To recapture that spirit, he’s holding brainstorming sessions with his young researchers. His legacy skills might not be easily replicated in Poland’s new educational system, which turns out more marketers than technicians.