Krakatau Steel to reduce workers

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)