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Krenholm plans more layoffs

Feb 12, 2004
By Sergei Stepanov

NARVA - Though the company confirmed last year that it would lay off 400 employees in April 2004, the Swedish-owned Krenholm textile producer will likely dismiss an additional 400 workers following recommendations from the World Bank.

Krenholm has not fared well as of late. Last year it was forced to fire 170 workers in connection with closure of its spinning facility.
The company currently employs 4,600 workers, 400 of whom will be dismissed by April as it was decided last year. According to the World Bank recommendations, the optimal number of employees at Krenholm should be around 3,800 to maintain stability and avoid a financial crisis.
Last week about 200 members of Narva trade unions held a silent protest in front of Krenholm headquarters in Narva.
Matti Haarajoki, managing director of Krenholm since November 2003, told the picketers about the financial difficulties the company was suffering from.
"The company has been in the red for the last two years. Today we can see a trend toward stabilization thanks to the support from two Estonian banks and the International Finance Corpo-ration," Haarajoki said.
"That means we will have to pay the interest for the loans, and in order to be able to do so we must make this company profitable," he added.
The primary costs to cut, according to Haarajoki, involve all management and production levels, meaning that salaries will not likely be raised this year.
"We have to improve our marketing work, find new clients and make new productions. Next year China will enter Europe's textile market without production quotas and that will toughen the competition," Haarajoki said.
"However, in the last several years major investments have been made into the company and that will allow us to increase the efficiency."
Julia Dmitrieva, head of the Krenholm trade union, is concerned about the rapid job cut in the problematic northeastern town of Narva.
"Sales have gone down to the level we had in 1996 because of the personnel policy of the company," she said.
She added that in other countries if the head of the company quit so did his managers, but in the case of Krenholm the old team has kept it positions after Meelis Virkebau left the company in January 2003.
Apart from protesting against the layoffs, the trade unions are also demanding higher salaries despite the hard times Krenholm faces.
Dmitrieva admitted that the call for higher salaries might sound illogical when the company is in trouble, but added that in her opinion minimum salary would not provide high quality production.
Boras Wafferi AB, the Swedish-based owner of Krenholm, plans to relocate its textile factory in Skene, Sweden, to Narva and may close its factory in Ruda, Sweden, according to the TT news agency.
The equipment from Skene would increase Krenholm's output by 4 million meters of cloth per year. However, the process of relocating the Skene factory's high-tech computer equipment would cost 11 million kroons (over 700,000 euros), which according to Dmitrieva might pose a challenge for the cash-stripped Krenholm.
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