Sandvik Group makes its cuts as part of its restructuring
The Sandvik group has announced job losses and restructuring within two of its business areas, Materials Technology and Mining and Construction. Materials Technology continues to restructure wire- and strip operations. Sandvik Materials Technology today initiated negotiations with the unions in Sweden to restructure the wire and resistance strip operations, which will enable a shift in the product mix toward more advanced and profitable products in key segments, such as the energy sector.
The restructuring will primarily affect production of wire and resistance strip in Hallstahammar, Sweden, which will be discontinued over the course of the next 18 months. In conjunction with this, efforts will be intensified to phase out wire products that are not sufficiently profitable or do not form part of the core business. The manufacturing of the remaining part of the wire product program will primarily be transferred from Hallstahammar to Sandviken, but some of the wire volume will also be moved to the wire-drawing plants in India (Hosur) and China (Shanghai).
In Sandviken, the parts of wire production that were destroyed in the fire in April 2011 will be rebuilt and fitted with more efficient technology. Production of resistance strip in Hallstahammar will also be relocated to Sandviken, with the aim of concentrating all strip manufacturing in Sweden to one location.
As a consequence of the planned changes, the workforce at Sandvik in Hallstahammar will gradually be reduced by 100 employees over the next 18 months. The aim is to manage the redundancy process in the best possible way.
“The restructuring is necessary to focus the product mix toward more advanced and profitable products. The planned measures also ensure that we conduct cost-efficient manufacturing and strengthen our position in key segments, such as the oil and gas- and nuclear power industry,” says Jonas Gustavsson, President of the Sandvik Materials Technology business area.
As part of the restructuring of the strip operations, decisions were also taken during the fourth quarter 2011 to discontinue the production of die cutting products in England (Rugby) and production of springs in China (Qingdao). The production at these facilities, which in total have about 30 employees, will be consolidated into other strip units within Sandvik.
The measures form part of the Step Change Program announced by Sandvik Materials Technology in September 2011, which aims to raise the business area’s profitability to a higher and more stable level and to strengthen the position in key segments. The restructuring costs are in line with what previously has been communicated.
Actions to achieve the goals in Sandvik’s new Group strategy for the Sandvik Mining and Sandvik Construction business areas have now been identified and approved. This will result in the workforce being reduced by 400 employees and a non-recurring cost of about SEK 500 M, which will be recognized in the fourth quarter of 2011.
In most cases, the global workforce reduction of 400 employees in Sandvik Mining and Sandvik Construction will only affect a small number of people per country and per production unit. Local negotiations will be concluded in the first and second quarters of 2012. The total includes already implemented, ongoing and planned restructuring activities, such as the workforce reduction announced on 3 November 2011 in Sandvik Mining and Construction’s operations in Sandviken, Sweden, as a result of the separation of the business area and the relocation of the head offices of the new business areas.
As part of the review, the two business areas have decided to focus more on the core operations, and for some smaller products in certain geographical areas, the sales channels will be adjusted, resulting in more sales via distributors to achieve better coverage of the regions where market penetration was previously weaker.
In addition, Sandvik’s legal entity in Algeria will be closed and, as of 2012, sales will be conducted via distributers in line with the updated strategy.
At the same time, production and sales will be discontinued for a small number of products that will not form part of the company’s offering in the long term. Sales of these products represented less than 5% of the joint sales of the two new business areas in 2011. An adjustment of the inventory value related to products to be discontinued for the recently acquired Shanghai Jianshi Luqiao and an adaptation to Sandvik’s stricter depreciation policy for slow-moving inventory is also included in the review.