Job Cuts Loom at Chemical Firms

EUROPEAN INDUSTRY

Competitive pressures on the European chemical industry are driving managers to trim costs with job cuts. As the latest crop of labor deals show, the task is not easy.

Managers at three European chemical producers--Lanxess, recently spun off from Bayer; Netherlands-based SABIC Europe; and Arkema, the chemicals arm of French petroleum giant Total--last week said that previously announced projects will proceed, with restructuring and job cuts. But all agreements required tough and adroit negotiations with employee representatives.

Lanxess managers have given the go-ahead for the restructuring of the new company's loss-making styrenic resins and fine chemicals business units after hammering out a deal with its employees. The bargain will save Lanxess roughly $125 million per year by 2008. A total of 960 jobs will be lost by the end of 2007, nearly all of them in Germany--a smaller number than the 1,200 that Lanxess first predicted.

The major cuts will come in the company's styrenic resins operations, for which Lanxess had mulled closing its site either in Tarragona, Spain, or in Dormagen, Germany. A comparison of the two units, however, "showed that both possess a considerable savings potential," a company statement notes. Both sites will be retained but restructured: Specialty styrenic resins will be concentrated in Tarragona, and Dormagen will be downsized and dedicated to producing high-quality products for Bayer MaterialScience, part of the company's former parent.

Meanwhile, three months of constructive discussion and negotiation between the management and the Works Council at SABIC Europe's Gelsenkirchen, Germany, polyolefins site, have brought agreement on job cuts.

Out of the planned 200 jobs originally set to be cut, only 175 now will go. Early retirement will feature heavily in the reductions, with layoffs in principle avoided "as far as possible," a SABIC statement puts it. The company also sees opportunities for jobs at SABIC in the Netherlands operations nearby, or for staff moving to a placement firm, which will help them find new jobs.

The initial restructuring of Gelsenkirchen will cover all changes needed to optimize the existing site, officials say. The second phase features extension of the site, with a new plant to produce bimodal polyethylene.

For Arkema managers, the cost-cutting was seen as necessary to maintain the company's place as a leading European player in chlorochemicals. Arkema first presented a draft consolidation plan to restore its long-term competitiveness and ability to ride out the economic climate, according to a company statement, in February. The plan required the loss of a total of 548 positions at four sites in France, although the company committed to terminating no employees.

It took nearly four months for the final bargain to be struck between Arkema and its employee representatives. The deal, among other points, boosts the number of employees that will be offered early retirement. The company also has offered to help other employees find alternative jobs in the same region.