Restructuring

In industry, restructuring is part of life. Hydro strives to engage in systematic, future-oriented planning in order to achieve positive processes, and limit negative consequences.

In industry today there is a need for companies to be able to adapt to changing conditions. Such adjustments are part of our daily life and the processes involved have ranged from preparing plant closures to building new plants and other activities related to acquisitions and divestments. An important element in all our restructuring work is to ensure responsible conduct in relation to society at large.

Restructuring entails both positive and negative aspects for employees and local communities. At many locations, Hydro is a cornerstone company. In such cases, it is particularly important to involve both employees and the local community. To respond to local conditions, we analyze the social consequences, and enter into a dialogue with relevant stakeholders. Involvement in local and regional initiatives must be in line with Hydro's business strategy and our guidelines for community investments.

Successful restructuring

Our responsibilities to our employees and to society at large lead us to help find new employment opportunities when production units are closed down. During the two last years, the magnesium plant at Becancour, Canada; the Søderberg production line at Årdal, Norway; and the Stade plant in Germany are among the sites with a large number of employees affected by closures.

Altogether, these closures affected close to 1,000 employees. By the end of the year, about 80 percent of those who actively searched for new jobs had found new employment. Business development, guidance, severance payments and funds for restructuring are among the tools utilized in managing these restructuring processes. In Årdal new business development has in fact absorbed all the supply of labor made available through the closure. The processes have been successful largely due to a constructive dialogue with the employees and the local communities affected.

Energy requirements for production at the Neuss aluminium plant in Germany have been secured for 2008, and we are working on securing the energy supply for 2009.

Our oil and gas activities were demerged October 1, 2007 and merged with Statoil, forming the new company StatoilHydro. The demerger directly affected 5,000 Hydro employees, most of them in Norway. With few exceptions, recruitment to new jobs has been conducted in an open process. Competitive terms were introduced to make it more attractive to change jobs and location. Following this process Hydro's corporate staff units were reorganized, streamlined and adapted to the needs of Hydro as an aluminium company. 

In July 2007, we entered into an agreement to sell our magnesium remelters in Bottrop, Germany, and Xi'an, China, to Varomet Holdings Limited, a subsidiary of the Australian mining company Straits Resources. The divestment concluded our decision to withdraw from the magnesium business.

Changes in automotive components

Our European production of automotive castings was sold to the Mexican group Nemak in 2007. This was part of the ongoing strategy to restructure our aluminium processing activities. In addition our share in a Mexican casting plant, that mainly produces engine blocks and cylinder heads, was sold. These sales affected more than 2,100 people. We have decided to continue our Automotive Structures operations, where a turnaround process has been launched to improve profitability. This sector has 1600 employees.

Moving forward in USA

Following a difficult market situation in USA, our Extrusion organization has been through significant restructuring measures. In total, the head count was reduced by over 265 employees or 25 percent. This included our operations in Ellenville, New York, which were closed during 2007. All Ellenville employees were offered a transition assistance program developed in conjunction with the local unions, including retention and severance payments, job search and resumé-writing training and personal counsel. In addition, a job fair was held in conjunction with local authorities. Employees were offered relocation assistance if they chose to transfer to available positions in other Hydro facilities.

Significant reductions took place at all US extrusion facilities, including the Baltimore sector office. In all cases, displaced employees were provided with severance and other transition benefits. Restructuring is also about looking forward for the remaining organization. In December 2007 a gathering brought together employees from all parts of our US Extrusion organization - including managers, operators, fork-lift drivers, maintenance workers, and so on - to take stock of their situation and develop plans that would accelerate the return of the business to a healthy state. They heard about Hydro strategy, market conditions, progress to date, customer satisfaction, and they all dicussed what it will take to cure what ails them.

New production

When planning new projects in Hydro, we also map environmental and social impact. Our analyses follow the Equator Principles, and thus reflect the World Bank's requirements regarding information, consultation and investigation of the project's environmental and social consequences, as well as an action plan and proposed initiatives. Dialogue with affected groups are used as input to plans detailing our environmental and social responsibilities. We strive to act in an open and credible manner, and gather views from interested parties with the aim of achieving a common understanding of the decisions that are made. 

In 2006, Qatar Petroleum and Hydro agreed to set up a joint-venture project, Qatalum, for the development, construction and operation of a major aluminium plant in Qatar. The project was finally decided on in July 2007 with production acheduled to start up in the fourth quarter of 2009. Qatalum aims to be a future catalyst for growth in the manufacturing sector in Qatar. This includes the purchase of goods and services.

The Social Impact Assessment (SIA) for the project revealed that the creation of 700 indirect and from the supply-chain induced jobs is expected, along with considerably increased household spending in the local economy. Qatalum management is already experiencing a keen interest from entrepreneurs who are considering setting up businesses to either supply Qatalum, and the fast growing aluminium industry in the Gulf region, with goods and services, or to produce finished or semi-finished products based on input from Qatalum.

When in operation, Qatalum will provide more than 1,000 permanent jobs in the local community of Mesaieed. The project will also create approximately 5,500 jobs for the three-year construction period. The SIA discloses that a major challenge linked to the project is the housing of migrant workers during the development phase. Great emphasis has been placed on securing good living conditions for the up to 10.000 inhabitants of the construction village - taking into consideration the different cultures and religions these will represent.