Denel subsidiary may cut jobs
Johannesburg - Denel Saab Aerostructures (DSA), a subsidiary of Denel, is considering cutting jobs by almost half as it embarks on a
turnaround plan, the company said on Wednesday.
"As part of the turnaround plan, DSA management is considering a reduction of the current workforce of approximately 670 by an
estimated 300 positions," DSA said in a statement.
These reductions would be achieved through the concluding of fixed-term contracts and the termination of foreign contractor agreements, among others.
"Should further reductions be required the company will consider forced retrenchments in terms of section 189A of the Labour
The turnaround plan was expected to reduce costs and enable it to reach break even on its balance sheet within five years.
"The restructuring involves a renewed focus on core business activities, a reduction in the current workforce and a sharing of services with Denel Aviation, another subsidiary within the Denel group."
DSA is responsible for the design and manufacturing of advanced aerostructures for the aviation industry.
The company said the global recession and delays to the Airbus 400M programme had had a negative impact on DSA's order book in
DSA made a net loss of R328m during the 2009/10 financial year.
"The restructuring should ensure the longer-term survival of the business and enable it to meet its contractual obligations."
To achieve this, certain functions within DSA, such as design-to-build, would be downscaled significantly.
Among the main cost drivers identified by DSA were material, labour and rental costs.
"DSA has already embarked on an initiative to reduce significantly its material costs through developing long-term agreements with suppliers and scaling down its rental footprint through the optimisation of space."
The company was also investigating the possibility of outsourcing certain production processes such as sheet-metal manufacturing and conventional machining to domestic and other industry players to further reduce fixed costs.
"This will enable DSA to focus on its core activities of assembling, high-end machining and special processes in the future."
DSA said it was consulting with Denel Aviation on how to share support services in functions such as human resources and information management to reduce overhead costs further.
Management was consulting with stakeholders, including organised labour, on the progress made on the turnaround plan.
"Once approval has been given DSA will initiate a S189A process during August 2010."