Press release Saarschmiede GmbH Freiformschmiede

Saarschmiede GmbH Freiformschmiede to be restructured

05 September 2017

The Supervisory Board of Saarschmiede GmbH Freiformschmiede agreed in its meeting today to accept the restructuring concept presented by the Management Board. Now the Supervisory Board of Saarstahl AG has to agree to the planned restructuring of the company in its meeting on 7th September 2017.

Saarschmiede (Forge) is suffering as a result of the difficult market situation in the energy sector and under the weak oil and gas market (see the review of the market situation below). Competition on the markets has become increasingly intense and therefore prices have come under enormous pressure. “The restructuring of Saarschmiede is necessary as a result of the continued extremely tense situation regarding both utilisation of capacity and the results” commented Martin Baues, Spokesman for the Management Board. “Due to continuing poor expectations of the market, it will not be possible to get anywhere close to utilizing the capacity which the size of the forge allows today”.

The restructuring concept proposes redimensioning of the plant with a reduction in production capacity and operating with a reduced amount of equipment. The area of the new Forge, which went into operation in 2010 and in which mainly large components are manufactured, is to be taken out of operation. “The aim is to adapt Saarschmiede to the circumstances on the market and to further reduce costs dramatically” Mr Baues emphasized. “The company shall continue to be active in the existing market segments but with a reduced portfolio in the field of manufacturing large components.” The aim is to achieve an increase in competitiveness through a further significant reduction in costs and by improving efficiency.

It is intended to enable Saarschmiede to have a new start as of 1.1.2018 under modified conditions and with lower capacity. The planned restructuring will make it necessary to reduce the personnel requirements by half from the current workforce of approx. 850 in the short term. The process of adapting levels of personnel is to be carried out using socially compatible measures such as the transfer of employees and measures for transition to retirement within the Saarstahl group as well as through a transfer company. “As we have done in the past – we will take the social considerations of workforce into account during the whole realignment process”, explains Peter Schweda, Member of the Management Board responsible for Labour at Saarschmiede. “This restructuring is painful but unavoidable”.

Review of the general market situation and the company situation:

Saarschmiede was hit by the full force and ongoing dramatic consequences of the Fukushima catastrophe and the change in energy policies which was subsequently implemented. The energy market has completely changed worldwide and the change in energy policies was driven ahead at high speed in Germany.

The situation has also worsened as a result of the continuing low prices for gas and oil. There has been and still is postponement or complete cancellation of investments in power plants, above all, in those using fossil fuel with a high level of efficiency and therefore in such highly technical and efficient products as Saarschmiede can produce them (such as high performance turbine shafts which allow a maximum degree of energy efficiency).

All of the measures carried out by the company so far for realignment and cost reduction have ultimately not been sufficient to reverse the loss situation. Since autumn 2016, the company has been working short time.