Krakatau Steel to reduce workers

JAKARTA (JP): PT Krakatau Steel, the state-owned steel manufacturer in Cilegon, West Java, will reduce the number of its workers by one third under a restructuring program in spite of its plan to increase production, its president says.

"We will move 3,000 of our 9,000 workers to new companies that we will establish to optimize the management of our certain assets for commercial purposes," Soetoro Mangoensoewargo said in Cilegon on Tuesday.

Soetoro said an internationally standardized steel company is considered efficient if each of its workers can produce 500 tons of steel annually. So Krakatau Steel, with an estimated future output of three million tons, will be efficient if the number of its workers is reduced to 6,000.

Soetoro said Krakatau Steel has reported its restructuring program to the government, in this case to the Ministry of Industry and the Strategic Industry Supervisory Agency (BPIS).

He said the government has agreed to the restructuring program, particularly after realizing that the company's profit steadily declined from Rp 250 billion in 1989 to Rp 50 billion last year.

The decline was partly caused by the impact of the government's 1991 deregulatory measures, which substantially reduced protection for Krakatau Steel, he said.

"But we will not terminate the 3,000 workers," Soetoro said, adding that most of them will be transferred to new companies that Krakatau Steel will establish.

Krakatau Steel also will not replace workers who retire or resign, he said.

Soetoro explained that Krakatau Steel will set up new companies to manage certain assets, including its coal port, water treatment plant, power plant and golf course.

A number of companies have expressed their interest to cooperate with Krakatau Steel to set up joint ventures to manage these interests, he said.

He said his company has assigned a management consultant, Booz Allen Hamilton, to assist it in the implementation of its restructuring program within two years, beginning early this year.

Soetoro was quoted by Kompas as saying that Krakatau Steel will not make additional investment for its restructuring program, including the establishment of new companies. (02)