RusAl Says It Won't Close Plant

United Company RusAl said Friday that it had no plans to close its Bogoslovsky Aluminum Plant after a local trade union and workers said Thursday that they were asked to accept significant salary cuts or else risk the plant’s closure. "We do not have current plans to close production at the Bogoslovsky Aluminum Plant," RusAl's press office said. "At the moment we are seeking the support of the staff for the tough but forced measures." Bogoslovsky’s union and workers said Thursday that the plant’s management threatened to close the smelter if they didn't accept salary cuts of up to 30 percent by April 10. A closure would cripple the economy of Krasnoturyinsk, a Urals town of 65,000 people where the plant is the main employer, and some workers said they were growing frantic. "The town will all die if they close the plant, but we will be forced to starve if we agree that our salaries be cut by a third," alumina shop operator Irina Milyutina, 33, said by telephone from Krasnoturyinsk, located 450 kilometers north of Yekaterinburg. "They are blackmailing us." The Bogoslovsky Aluminum Plant is the sixth-largest aluminum producer and the second-largest maker of alumina in Russia, and RusAl is the world's biggest producer of aluminum. A spokeswoman for RusAl said Thursday that workers have been asked to take a 25 percent pay cut but declined to say whether an ultimatum had been issued. "A temporary 25 percent reduction of salaries from June is being discussed with workers to keep the plant going," the spokeswoman said in written reply to questions. "The company has been subsidizing the plant for several months already," RusAl said Friday. "We have already cut management costs, revised the logistics schemes and are actively optimizing the supply component." The plant's chief executive, Oleg Burkatsky, met with workers on Monday and Tuesday to explain the need to cut salaries or possibly close the plant, said Valery Tushevsky, deputy chairman of the plant's trade union. He told workers to make up their mind by April 10. "We are not going to agree to a 30 percent cut," Tushevsky said. "It would be better for [RusAl CEO Oleg] Deripaska to sell his mansions in London than to victimize people over the global economic situation." He said plant workers were desperate. "They are ready for a strike, a demonstration, a blockade of the federal highway -- anything," Tushevsky said. Milyutina of the alumina shop said the plant CEO told the workers that he could not guarantee that RusAl would not close the plant even of their salaries were reduced. Milyutina said she would not be able to feed her two sons if she agreed to the salary cut. "I would get about 7,000 rubles [$210] a month then," she said. "I have to pay 4,000 rubles for my housing bills and 1,000 rubles for one son's kindergarten. What would I have left for food through the whole month?" She said many of the plant employees were in an even worse predicament. "They also have loans to pay off," she said. The trade union official said plant management has explained the cuts are needed because of a drop in world aluminum prices and an increase in electricity tariffs. "The chief executive told us that RusAl loses up to $1 million every day at its plants in Russia," Tushevsky said. RusAl plans to reduce its aluminum production by 11 percent, or 500,000 tons, by late April and has said it could cut it by a similar amount later this year if prices fall drastically. Aluminum prices have plunged by nearly 60 percent since July to $1,378 a ton on Thursday. Since then, RusAl has lowered production costs by 38 percent, and it says it intends to cut them by another 18 percent to $1,040 per ton by the third quarter. The RusAl spokeswoman said production costs at Bogoslovsky now stand at $1,672 per ton — among the highest in the company. Electricity accounts for 31 percent of expenses, while bauxite accounted for 36 percent, she said. "A recent 28 percent increase in electricity tariffs has become a burden for our production cost initiatives," she said. She said RusAl was holding negotiations with the Sverdlovsk governor and his administration about cutting electricity tariffs to their former level. Sverdlovsk administration spokeswoman Natalya Ponomaryova said electricity tariffs were being discussed but no decision had been made. RusAl has found itself in dire straits as it grapples to pay off its debt of $14.8 billion, including $8 billion due this year. The government said last week that it would not bail out the company. The RusAl spokeswoman said workers would get their old salaries back if aluminum prices grew to $1,500 per ton over the next three months and the plant managed to cut production costs to $1,000 per ton. Marat Gabitov, a metals analyst with UniCredit, voiced skepticism that the plant would be able to lower costs so significantly. "Given how outdated the equipment is at Bogoslovsky, it is unlikely that RusAl will get production costs of $1,000 there," he said. Russian law does not allow an employer to change a labor contract, including the terms of remuneration, because of a change in the financial position of the company, said Yulia Tsokol, a partner at the law firm Goremykina, Tsokol and Partners. "However, all the terms of a labor contract can be changed if there is an agreement between the company and the employees," she said. "If RusAl manages to persuade the employees, it will not break any laws."