Employees of UC Rusal plants are facing a bleak future

If mass cuts will begin at the plants in the Irkutsk region.
Employees of Bratsk and Irkutsk aluminum plants (BrAZ and IrkAZ) UC Rusal may be dismissed, Interfax reports. At both plants a total of about 6,000 people work, another 3,500 - in auxiliary and related enterprises, the load of which depends on BrAZ and IrkAZ. The agency reports that up to 10-15% of the personnel of both plants can be dismissed.

Reductions at the UC Rusal factories will provoke social tension, Olga Nosenko, deputy of the Legislative Assembly of the Irkutsk Region, believes. She recalls the closure of the pulp mill in Baikalsk in 2013, when workers staged strikes and went on hunger strikes. For Bratsk, the aluminum plant is one of the main employers. IrkAZ is considered the town-forming enterprise of Shelekhov. According to the Federal State Statistics Service for 2016, there are 232,875 people living in Bratsk, and 47,493 in Shelekhov.

The decline in production is a consequence of the loss of large foreign buyers of aluminum after the introduction of US sanctions. Oleg Deripaska, the main owner of UC Rusal, met with the leadership of Irkutsk enterprises, the decision on reductions will be made by June 7-10, Interfax reports. A spokesman for UC Rusal declined to comment on the cuts. However, municipal deputies, city mayors and local trade unions are discussing the upcoming dismissals. "Vedomosti" evaluated possible scenarios for the development of events.

What's happening in Bratsk?

The fraternal aluminum plant is the largest in Russia in terms of production volumes. According to the annual report of UC Rusal, in 2016 it produced more than 1 million tons of marketable aluminum, about a third of all the company's products. About 4,000 people are employed at the BrAZ, about 1,400 work in the branch of the Russian engineering company UC Rusal in Bratsk, said Nikolai Evstafiev, chairman of the Irkutsk regional organization of the mining and metallurgical union.

The management of the enterprise did not notify of the reductions, says Sergey Skovpin, chairman of the trade union committee of BrAZ. "The buildings are smoking, people are taking people to the factory, the workers are being fed, they give out their overalls, all are in regular mode," he asserts. Skovpin says that people received wages without delay for March and an advance for April.

Representatives of the administration of Bratsk argue that they do not know about the reductions. Mayor Sergei Serebrennikov told Vedomosti that he did not know anything about the layoffs at the plant, in Bratsk a stable situation, and the enterprise "fulfills all obligations in full."

What is happening in Shelekhov

There were no meetings with the team at the Irkutsk Aluminum Plant, says Alexander Titov, chairman of the IrkAZ trade union committee. He says that the plant does not reduce the volume of output, the team received money on time.

IrkAZ is located in Shelekhov, just 20 km from Irkutsk. According to the annual report, in 2016 the plant produced 415,000 tons of commercial aluminum. The company employs about 2,200 people, and about 2000 people are engaged in related industries: the plant for the production of aluminum powders SUAL-PM, a branch of the Russian engineering company and a silicon plant, says Evstafiev.

The issue of reductions was addressed at one of the meetings of the Small Business Council at the district administration, said the Shelekhov businessman, who was present at the meeting. The representative of the local employment center at the meeting said that there had been no notification of reductions, since the beginning of April only four IrkAZ drivers had been registered.

In the administration of Shelekhovsky Municipal District they told that there were no meetings in the mayor's office about the situation on Irkutsk. According to the representative of the administration, these issues are discussed only on the sidelines with plant representatives, but even in private conversations, IrkAZ management does not confirm that dismissals are possible. In Shelekhov's administration they did not answer the request of Vedomosti. The mayor of Irkutsk refused to predict the consequences for the city, "not knowing the scale of the cuts."

How to download production

The fate of aluminum plants in the Irkutsk region depends on how quickly UC Rusal will find new markets. As previously Vedomosti reported, in April the decrease in exports of UC Rusal could reach 20%. The company does not cut production - the products go to the warehouse.

45% of aluminum UC Rusal sold to the European Union, 17% - in the US, 18% - in China, said the director of corporate ratings ACRA Maxim Khudalov. In his opinion, the only way to compensate for the loss of orders is to sign a major contract with China. Beijing may increase purchases of Russian aluminum, because it plans to close part of its own production, Khudalov said.

Negotiations on deliveries will be delayed for at least half a year, SBS Consulting consultant Maria Osolodchenko is sure. Even if the deal takes place, China will agree to buy aluminum at a lower price than it pays now, which means that there can be no cuts in the factories, says Osolodchenko.

Dismissal of 10-15% of employees of aluminum plants will not help significantly reduce costs, says Grigory Finkelstein, partner of Ecopsy Consulting. He recalls that the most costly article in the production of aluminum is electricity, not wages. The company will fire the worst employees and people retirement or retirement age, suggests Finkelstein. In aluminum plants, men retire at 45, and women at 40, says Skovpin.

How to reduce earlier

Victoria Petrova, HR Director of UC Rusal from 2001 to 2011, recalls the crisis of 2008, when UC Rusal announced the closure of four plants: Nadvoitsky in Karelia, Bogoslovsky in the Urals, Volkhovsky in the Leningrad region and Novokuznetsk in the Kemerovo region. Then, she says, it was a matter of cutting more than 2,000 workers and UC Rusal turned to the state for help. According to Government Decree 1089-r of December 31, 2008 on additional measures to reduce tensions in the labor market, the budget compensated companies for about 20% of the cost of releasing staff - dismissed workers sent to household work, retraining and allocated funds to move to a new place of residence and work. With a reduction of 10-15% of workers in both plants, the company will certainly cope on its own, Petrova believes.

According to her, it is impossible to introduce a shortened four-day week at the IrkAZ and BrAZ plants, or send employees on vacation, because the production cycle is continuous - aluminum electrolyzers work without stopping until they completely exhaust their resource. Shutting down the equipment and its subsequent launch is too expensive and complicated, Petrova says.

The second wave - in 2013 the company froze production at six enterprises due to falling prices for aluminum: Volgograd, Volkhov and Urals aluminum plants, at several sites in Novokuznetsk, Bogoslovsk and Nadvoitsky plants. Then, several thousand people fell under the reduction. For example, laid-off employees of the Bogoslovsky plant were given jobs at the Boguchansky aluminum plant, at GAZ in Nizhny Novgorod and on construction sites in the south of Russia, says Roman Lukichev, a representative of UC Rusal in the Ural Federal District. According to him, UC Rusal agreed on the employment of former employees and Nizhny Tagil Uralvagonzavod, which in 2013 just received a new state order and expanded production. People who left by agreement of the parties received good weekend benefits. About 300 employees of Bogoslovsky Plant were paid from six to 10 salaries, besides, UC Rusal repaid loans of laid-off workers for up to 100,000 rubles, Lukichev asserted.

Where to go to work

UC Rusal is unlikely to be able to use the previous experience: there are no vacancies at large plants in the Irkutsk region, say representatives of the regional recruitment agencies. Reduced staff of IrkAZ will be able to find work independently, I am sure Yulia Petrova, coordinator of the community of professionals in personnel management in the Irkutsk region. People from Shelekhov will find vacancies in other industries in neighboring Irkutsk, where you can go by car every day, she says. However, near Bratsk there are no large enterprises, and the regional center is almost 500 km away, says Yulia Petrova.

Workers and masters of factories can work on a rotational basis in gold mining or oil companies in the region, says Anna Kuzmenko, general director of Irkutsk personnel company Personal Studio. According to her, the engineers and technical workers will suffer most of all, because there are no similar vacancies in the plants in the region.

Metallurgists will have to change their qualifications to settle, for example, woodworking enterprises, says Maria Oschepkova, deputy director of the Bratsk Employment Center. Even if IrkAZ and BrAZ engineers find vacancies, their earnings will decrease. Their salaries in UC Rusal are much higher than the average in the region, says Petrova. According to Rosstat, in 2016 the average salary in Bratsk was 41,118 rubles, and in Shelekhov - 37,470 rubles.
Who will support

The current talk about the cuts on IrkAZ and BrAZ is a test ball that the company is testing the state's willingness to invest in its rescue, suggests Vladislav Bykhanov, partner of CornerStone. The head of the Ministry of Industry and Trade Denis Manturov said on April 12 that the ministry is ready to support the plants. A representative of the government of the Irkutsk region said that the regional ministry of labor is ready to develop measures to reduce tensions in the labor market. But from the regional budget to allocate money for compensation to employees will not work, Nosenko said. Deputies have already approved a budget plan for 2018 with a deficit of about 4.9 billion rubles.