ISD Dunaferr to lay off 800 people in Hungary

The paper said a plan for the mass layoff was handed to labour unions and work councils two weeks ago. Dunaferr - in order to meet the owners’ expectations - plans to outsource certain services and activities, e.g. interpreting and translating services; the facility’s fire fighting and security dispatcher service; truck and other vehicle drivers and PR activities. This will affect 84 people, the paper learned.

ISD Dunaferr also wants to shut down its long-standing Lőrinci Rolling Mill as of 1 December, which will end the employment of 256 people.

A massive layoff indeed

The layoff will affect a total of 800 employees, according to the notification sent to the unions. The remaining 460 people to be sacked (after the outsourcing of 84 people and a cut of 256 jobs at the rolling mill) are to be the white-collar staff of the steel works. A decision on headcount optimization affecting them was brought in 2011.According to ISD Dunaferr’s annual report, the company has 7,012 employees, of which 4,742 are manual labourers and 2,253 are white-collar workers. This means the 800-strong staff cut affects more than 10% of total headcount.

The downsizing stands out from the line of mass layoffs in Hungary. Nokia announced in February to let go 2,300 employees. Before that there were reports of staff cuts in the banking sector and several hundred people lost their jobs due to the collapse of the national airline Malév this year.

Not out of the blue

ISD Dunaferr Zrt. as member of Donbass Industrial Union announced a plan last December to lay off 15% of its white-collar employees who work in areas not directly connected to management and production. At that time the timing of the staff cut was not revealed, and no official information was brought to light about the closure of the rolling mill either.

In mid-May this year Evgeny Tankhilevich was appointed CEO of ISD Dunaferr Zrt. Before that he has been general deputy CEO since 28 September 2011. "The main aim is to make the ISD Dunaferr Company Group a well-managed, transparent company," Tankhilevich said then.

“We consider it important that the modernisation of the technological equipment that has already started should be completed in order to increase the productivity of the Company. We would also like to make employees interested in increasing performance, therefore we are planning to develop a new motivation system," he added.

In an interview in early June he said, however, that Dunaferr’s “traditional European markets are in very poor shape. Prices for our finished goods never recovered since 2008 crisis."

“[...] Dunaferr continues to lose its competitiveness in its traditional markets. Should we fail to buck this negative trend, 2012 is likely to become fourth year in a row when the Group suffers losses. To say the least, our continuing operations are under threat and I should not surprise anyone by saying that Dunaferr remains intact mostly because of continuing financial support from the shareholders," he added.

“A huge reserve of efficiency lies in the reduction of headcount. With more than seven thousand people in the organization, of which significant amount works in various administrative and management positions, Dunaferr is set to remain far behind its major European peers. In my opinion, level of red-tape makes our economics non-sustainable as too many people are working with papers rather than with steel," the CEO concluded.

How did Dunaferr fare?

ISD Dunaferr’s 2011 annual report shows a HUF 42 bn yr/yr revenue growth to HUF 300 bn, while its operating loss increased to HUF 4.7 bn from HUF -1.7 bn in 2010. The company incurred a HUF 20.3 bn net loss last year.

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