Mining company OKD announces job cuts

Mining company OKD is to make 250 workers redundant and cut the wages of remaining staff, because the financial crisis has led to increased operating costs and lower coal prices. The hard coal extraction company, one of the biggest coal producers in Europe, operates in the North Moravia region in the Czech Republic. Its announcement, in May 2013, coincided with predictions that the region's mining and metallurgical industry could lose up to 13,000 jobs by the end of 2013.

Background

OKD is the only producer of hard (bituminous) coal in the Czech Republic and, in terms of production volume, it is one of the five largest companies in Europe. Coal is mined in the Ostrava-Karviná district in North Moravia and is then processed and refined.

According to the company’s 2012 annual report (1.7 MB PDF), it employed an average of 13,068 people in 2012. In mid-May 2013, the company announced that, because of the adverse economic situation, which has led to high operating costs and low coal prices, extensive austerity measures would be adopted. The price of coal has already fallen below the level of the operating costs of some mines in the OKD group, which ranks among the five hard coal mining companies in the world with the highest costs of extraction. In addition to restrictions on investment, a merger of the management in all four of OKD’s mines and the sale of certain operations (for example, the sale of the Paskov hard coking coal mine), lay-offs and pay cuts are under consideration.

Cost-saving measures announced

OKD spokesperson, Vladislav Sobol, said that the number of technicians and administrative staff is to be reduced by about 250 from September 2013. All affected workers have already been told and those who have worked for the company for more than two years will receive severance pay equal to seven months’ wages.

The company has also announced a 10% reduction of all wages. However, Jaromír Pytlík, the chairman of the Association of Mining Unions Havířov (SHO), says that ‘Miners fear that the pay cuts mean only the first step. Additional measures might be the closure of the site by the owners.’ Trade unionists think the situation is mainly due to a decrease in coal prices. Jaromír Pytlík said in an interview for the newspaper Lidové Noviny: ‘I have been working in OKD since 1983. I experienced major dismissals in the early 1990s, but I think that the situation was not as serious as it is now.’

Trade unionists announced in July that the OKD management had failed to agree to a new collective agreement, over which negotiations began in the summer of 2012. The current collective agreement is valid until the conclusion of a new collective agreement, which will take place on 31 December 2013 at the latest. Until this time, therefore, both parties have decided to resolve disagreements through nominated mediators.

Effect on regional employment

The unfavourable economic situation OKD faces will also affect its supply companies. According to Mr Sobol, the number of employees from supply companies is to decrease from September to 2,700, a cut of approximately one-third in the numbers employed at the end of 2012. Mr Sobol said that ‘The majority of workers are from Poland, but almost a third of the workforce consists of people from the region.’

The local employment office has already dealt with the problems associated with the mining and metallurgical industry, which employs thousands of people in the Ostrava-Karviná region. In the worst case scenario, it is estimated that about 13,000 people could lose their jobs in the region by the end of 2013. About 70% of these will end up at the employment office. This crisis scenario also envisages the possibility of dismissals in the company Evraz Vítkovice Steel, whose plant announced a temporary shutdown of operations in early July 2013. The governor of the Moravian-Silesian Region, Miroslav Novák, believes that the issue is becoming a national problem and he intends to ask Prime Minister Jiří Rusnok for help.

Soňa Veverková, Research Institute for Labour and Social Affairs

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