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.

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.

Community impacts

Building the new aluminium plant Qatalum in Qatar has been a core activity throughout 2008. Towards the end of the year, the emerging financial crisis has forced us to prepare for a new global situation.

Demanding restructuring

In recent years we have accomplished several demanding restructuring processes worldwide, in line with The Hydro Way. These experiences are important to build on as we are now in the middle of even more challenging restructuring.
The demanding market situation (see page 8 in the Annual Report 2008) has resulted in capacity reductions and closures at Karmøy, Norway and Neuss, Germany as well as in our downstream operations. About 3,500 employees are directly affected by the reductions.
In our downstream operations, cost cuts and manning reductions have been implemented in response to the decreasing market. This includes reduced shifts, lay-offs and other cost-cutting initiatives. Our automotive component activities and operations in the USA have been severely hit. The difficult market situation affected our operations in the USA much earlier than in the rest of the organization. Since 2006 we have almost halved the number of full-time equivalents there, while sales volumes have been reduced by nearly 40 percent. All reductions involving union employees have been communicated in advance to the unions and have followed the lay-off requirements specified in each collective bargaining agreement. Non-union lay-offs have been handled fairly, objectively and in a manner that reduces the risk of discrimination as it pertains to age, gender, race and veteran status, while preserving the competence needed at each plant.

Early 2009 a project was established to review central staff functions. The ambition is to develop a leaner corporate center with strong competence in prioritized areas and at the same time attain cost-reductions.

'Beyond Nashville'

In North America slow markets, decreased production and uncertainty regarding Hydro's commitment in the US have left many employees feeling insecure, vulnerable and doubtful about Hydro's future. There was a need to engage employees at several levels and locations to share best practice and generate new ideas. A two-day kick-off meeting in Nashville, Tennessee in December 2007 included a cross-section of employees. The aim of the meeting was to engage, energize and rebuild confidence in key employees who could then act as ambassadors, returning to their plants to deliver the message of Hydro's commitment, vision, and plans for moving the organization forward. 'Beyond Nashville' continues through different initiatives at various plants around the country to make Extrusion Americas the success it can and should be by addressing areas for improvement as identified by both management and hourly work teams.

New projects

When planning new projects in Hydro, we also map environmental and social impact. Our analyzes follow the Equator Principles, and thus reflect the World Bank's and the International Finance Corporation's (IFC's) requirements regarding information, consultation and investigation of the project's environmental and social impact including human rights, 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.

Hydro holds a 20 percent share in a planned alumina refinery Companhia de Alumino do Pará (CAP) in Brazil. The remaining share is owned by the Brazilian mining company Vale. Before entering into the project, we initiated an independent review of the resettlement process. The review concluded that the resettlement process had been conducted in compliance with e.g. the Equator Principles and the International Finance Corporation Performance Standards. The resettlement involved some 600 persons or 120 families. Most families have through a survey stated that their quality of life is unchanged or improved after the relocation. The affected families will be followed-up so that potential needs for improvements are assessed and implemented.

In 2006, Qatar Petroleum and Hydro agreed to set up a 50/50 joint-venture project, Qatalum, for the development, construction and operation of a major aluminium plant in Qatar. Production is scheduled to start up at the turn of the year 2009/2010. Qatalum aims to be a future catalyst for growth in the manufacturing sector in Qatar. This includes the purchase of goods and services. Hydro is responsible for the construction of the plant.

As indicated by the social impact assessment (SIA) prior to construction, major challenges have been linked to the housing of migrant workers. A new Construction Village was built to house up to 10,000 workers on behalf of Qatalum contractors, catering also for various religious and leisure needs as well as including a medical clinic. All are free-of-charge for the workers. The remaining workers are housed at other camps leased by the project or in the contractors' own facilities. All camps are inspected by the Qatari authorities as well as by the Qatalum project, with the emphasis on conditions of safety and hygiene. In some cases it has been deemed necessary to move contractor employees to other camps.