Following the restructuring of Romania’s Galaţi steel plant in July, the company has announced a further round of voluntary redundancies. It told employees the decision was motivated by the need to stay competitive, to improve productivity, and cut costs. The management’s announcement has divided employees. Trade unions and many workers are angry about the initiative, while those close to retirement see it as an opportunity to receive an attractive redundancy package.
Romania’s Galaţi complex steel company was known as Sidex Galaţi until 1989, and was once the largest steel works platform in south-east Europe. It was taken over by Mittal Steel, the predecessor of ArcelorMittal, in 2001, and at that time the plant employed 27,597 people.
Under a Privatisation Agreement signed with the Government’s Authority for State Assets Recovery (AVAS) in the summer of 2001, collective dismissals were prohibited, and the new owners undertook to maintain employment levels for five years.
Despite this commitment, between 2002 and 2006 around 10,000 employees left their jobs at Galaţi voluntarily. This meant the firm’s management were able to honour its obligation to refrain from collective dismissals but still cut staffing levels.
From 2006 onwards, the management continued to encourage workers to leave by offering redundancy packages on terms that were more favourable than the mandatory compensation pay provided by law. Between 2006 and 2011, another 7,000 employees were tempted into successive waves of voluntary redundancies.
According to the formal balance sheet posted by the company on the site of the Ministry of Public Finance (MFP), by the end of 2011 ArcelorMittal Galaţi employed a total of 8,755 workers, almost 19,000 fewer than at the beginning of 2002.
A new structure within the company was agreed at the Luxemburg meeting of the European Works Council in July this year. Following the meeting, and in the context of the current difficult economic trading conditions across in Europe, ArcelorMittal focused on the need to improve the competitiveness of its business at all levels.
With this in mind, the company commissioned consultants to make a detailed analysis of personnel requirements under a future ‘organisational chart’ that included manpower restructuring and staff cuts. The company told workers’ representatives that they would be kept informed about the outcome of this analysis.
The Galaţi management explained:
…the workforce readjustment plan would be based on an assessment of the real manpower requirements for all production plants, in view of the new harsh market conditions.
The compensation scheme proposed by ArcelorMittal Galaţi consists of between six and 21 monthly average salaries, determined by an individual’s length of service:
Those amounts will be supplemented with the flat rate sum of approximately €3,300 for workers with up to five years’s service, and between €5,500 and 6,700 for workers with more than 10 years’ service. The flat rate amount will be calculated based on the salary cost for each employee.
Workers can apply for voluntary redundancy during August and September 2102, and terminations proper will have to be completed by the end of October 2012.
1,200 workers will be selected for the scheme. In the first phase of selection, employees requesting redundancy were transferred to the company’s Structural & Skill Pool Department. The final list will be determined on the basis of pre-established criteria such as an individual’s current salary, their occupation and their skills.
In May this year, at a meeting of the Social Dialogue Committee at the Prefecture of Galaţi County, the leaders of the trade unions Siderurgistul and Solidaritatea expressed their concern over the scale of the cuts, especially as almost 20,000 jobs have already been lost over the past 10 years
The unions said if the situation at the plant worsened, and if the owner decided to pull out of Romania altogether, they would demand the nationalisation of the plant to save the jobs of the 8,000 still working there.
Vasile Crişan, Secretary General of Siderurgistul, said in a media interview that he wanted to protect not only the 8,000 employees, but also their families, and, eventually, the future of an entire town.
The plant’s other trade union, Solidaritatea, supported the demand for the nationalisation of the company. Solidaritatea President Gheorghe Tiber has asked the Authority for State Assets Recovery and the Ministry of Economy, Commerce and Business Environment (MECMA) to release a copy of the original Sidex Galaţi privatisation agreement. He wants to know what obligations, if any, the owners current owners have to maintain the facility as an active business. AVAS has used a confidentiality clause to turn down the union’s request.
When the management announced the new voluntary redundancy scheme, the trade unions and their members opposed it. They were also angry at not having been consulted on a matter which they considered of utmost importance for them and their job security.
When the Institute of National Economy (IEN) contacted Solidaritatea President Gheorghe Tiber, he voiced his fears for people’s jobs and the existence of the plant itself. He commented: ‘The Romanian State should not have taken its hands off this goose that lays golden eggs.’ He added that efforts should be made to save the production facilities still in operation at the former Sidex plant.
Although the great majority of the employees see their jobs as vital to their livelihood, there are workers, most of them close to retirement age, who welcome the prospect of voluntary redundancy.
ArcelorMittal has acquired four industrial factories in Romania, Galaţi, Hunedoara, Roman and Iaşi. At all of them, immediately after privatisation, workers were offered tempting voluntary mass dismissal terms.
While in the first years after privatisation the severance pay was co-financed by the Romanian Government, the costs of subsequent compensation schemes have been borne entirely by employer.
For this reason, but also due to the economic crisis, the worth of the current compensation package is lower. It consists of a smaller number of average salaries, and the severance payment calculations are based on earnings that have diminished in recent years due to cuts in bonuses, premiums and allowances.
Constantin Ciutacu, Institute of National Economy, Romanian Academy