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Vacon starts negotiations with staff to cut costs

18 December, 2011

The Finnish drives-maker Vacon has started negotiations with its white-collar personnel that could result in the loss of up to 60 jobs, and temporary layoffs of up to 400 employees in its parent company in Finland. The company is implementing a global cost-cutting programme in response to the European financial crisis and a downturn in orders for its windpower and motor control products.

During 2012–2013, Vacon hopes to achieve annual savings equivalent to 60 man-years in its parent company, and 10 man-years in its subsidiaries. The negotiations affect around 420 workers in Finland, where the company employs 750 people. The aim is to find cost-saving measures that will help to ensure the company`s competitiveness as well as allowing it to continue developing and launching new products.

Vacon is considering measures such as: reductions in fixed-term office personnel; voluntary leaves of absence; part-time working, exchanging holiday pay for time off; outsourcing; and temporary lay-offs. It is also looking at re-organising its global operations.

As well as reacting to a drop in orders, Vacon says the measures are designed to the counter the poor predictability of market. Demand for Vacon`s windpower products started to decline in June 2011 and during the fourth quarter of 2011, demand for its motor control products also weakened.

“The reason for the weakened demand is in the prolongation and escalation of the European finance crisis,” explains Vacon`s President and CEO, Vesa Laisi (above). “At the moment, it is particularly difficult to estimate how the markets will develop. Therefore, we have to act now to ensure that we will survive with our feet dry if the crisis deepens further and drags on. This is the only way we can make sure that we are prepared when the market picks up.”

Vacon has production and R&D operations in Finland, the US, China and Italy, and sales offices in 27 countries. In 2010, the company had revenues worth €338m and employed 1,300 people globally.

♦  In a separate development, a Chinese court has sentenced Vacon to pay compensation after the company was accused of importing components with the wrong customs tariff classification. The court ordered Vacon to pay compensation totalling €5.5m, consisting of unpaid customs duties as well as a penalty. The court also imposed prison sentences of 10 and 12 years on two former Vacon employees in China

“It has always been, and will always be, Vacon’s explicit policy in its global operations to comply with both local and international legislation, rules and regulations,” says Laisi. “We are pleased that the court ruled in Vacon’s favour concerning the customs tariff on the components – that it should be 8% and not the 10% demanded by the prosecutor. We are also happy that the matter has been brought to a conclusion, and we do not intend to appeal against the ruling.”

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