At the end of 2008, ArcelorMittal Galati estimated that it would lower production by up to 30 percent in 2009. Today however, the company’s management admits that 2009 estimates are based on using only 40-45 percent of the production capacity, which means a decline in annual steel production to 2 million tons from 3.9 million. his drop in production is due to the fact that the number of new orders fell by up to 60 percent, deliveries plummeted, and steel prices halved, even on markets less affected by the crisis. “We had all hoped to see a rebound in the second quarter, there were some signs in February indicating that the economy will bounce back, but this did not happen, and now we see March and April, two months that were just as bad, and it seems that the crisis will last much longer than expected,” said Augustine Kochuparampil, Chief Executive Officer of ArcelorMittal Galati. In order to survive, ArcelorMittal Galati adopted a set of measures which are both unpopular and costly. In addition to cutting production, the group’s management decided to close the Galati-based coking plants and halt coke imports from the company’s Polish subsidiary.
The closing of the plants was decided after the majority shareholder invested over $100 million in this asset. Stopping the coke production will affect some 1,500 employees who will have a choice of resigning and receiving a compensation payment package or accepting to requalify and be given another job within the company. “Of the 1,500 employees, 250 have chosen voluntary resignation. We are considering a special scheme for them, as they are highly specialized, and we are now discussing the compensation package with trade unions,” the company’s manager said yesterday. “For this year, we estimate some 2,000 voluntary resignations, but we have not set a fixed number of layoffs. We believe we will have some 11,500 employees by the end of this year,” the company official added.
Moreover, the company’s departments will be restructured, as there are too many administrative levels between the general manager and workers, and this affects communication. “We are rethinking and redrafting the entire organizational structure, to make this more efficient, and to raise the number of people involved in planning and control activities,” Kochuparampil said. The company’s management plans to cut the levels, first to seven, and then to five from a present 9-10 levels. The project was already included in the enterprise’s strategy but the crisis accelerated the restructuring process.
