Prague Post reported that ArcelorMittal Ostrava will lay off 600 employees, citing a prolonged period of uncertainty in the European market, where excess supply and low demand are pushing down prices and forcing producers to restrict their output.
In response to the cuts, 1,000 workers demonstrated in front of the plant gates on December 7th 2011.
Mr Tapas Rajderkar CEO of ArcelorMittal Ostrava said that "Only the most efficient operations with the lowest cost and best service to customers will survive, those that can compete even when the market is down. ArcelorMittal needs to improve productivity significantly to remain competitive in these challenging times."
ArcelorMittal Ostrava is offering a voluntary leave package to 10% of its 6,000 employees, including those in subsidiaries ArcelorMittal Energy Ostrava and ArcelorMittal Engineering Products Ostrava, with the period for voluntary resignation starting December 12th 2011 and running through January 20th 2012. For employees who leave or are laid off, the company will be offering information on retraining through counseling centers.
The layoffs highlight the increasing strain on the industrial companies that are the backbone of the economy, as demand in major export destinations embroiled in the euro zone crisis falters and GDP growth forecasts for Europe and the Czech Republic continue a downward trend.
Mr Bohuslav Čížek, an analyst at the Confederation of Industry, said that "Although in general, we do not expect any mass significant one-off layoffs, the forecast for unemployment is rather negative due to the expected economic slowdown." He added that layoffs are expected to continue in construction, heavy industry and industries related to durable goods, as well as those industries' suppliers and small and medium enterprises.
He said that "Many companies will definitely have to reduce their staff. Industrial companies will be very careful about hiring new employees and will be forced to find some extra savings measures, including reduction of staff costs."
Mr Čížek said that cuts are driven by uncertainty in the financial markets and flagging foreign demand. In addition, domestic demand is slackening and that will likely be exacerbated by austerity measures and an increased value added tax that take effect next year. He added that "The VAT cannot and will not be fully moved to consumers. Producers will have to lower their margins. The VAT as such would not be that destructive, but in times of diminishing demand, it presents another burden for economic recovery."
If all goes as planned, the government will raise the lower VAT rate, which applies to food and construction items, among other things, to 14% from the current 10%. In 2013, the higher and lower VAT brackets are expected to be unified at 17.5%.
Mr Vít Samek, an economist for the Czech-Moravian Confederation of Trade Unions, said that "The Czech economy, from our estimates, will experience negative growth next year. So we can expect increasing unemployment. There is no chance, because there are no proactive policies on the side of the government."
Mr Samek said that "The government needs to introduce public procurements, like in transportation. It is the investment that is missing. There is no other solution; you can't retrain the work force because we don't know what to train them for. The government needs to support new investments."
(Sourced from www.praguepost.com)
