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Liberty's Largest Crisis in History: Mass Layoffs Averted by Collective Bargaining Agreement

Liberty's Largest Crisis in History: Mass Layoffs Averted by Collective Bargaining Agreement
photo: Liberty Ostrava/Liberty's Largest Crisis in History: Mass Layoffs Averted by Collective Bargaining Agreement
08 / 09 / 2023

Over the past few months, the steel market has faced a downturn. This decline is attributed to several factors: a significant drop in steel product prices compared to the previous year, lackluster demand in the construction and engineering sectors, and competition from cheap imports. Recent developments at the Liberty smelter in Ostrava, owned by Indian businessman Sanjeev Gupta, offer a snapshot of the broader situation.

While Liberty has dealt with operational hiccups in the past, the imminent closure of its most significant coke battery, slated for September, is a significant blow. RAILTARGET has covered the company's financial woes in the past—not just within the realm of rail. The impending shutdown has sparked considerable concern from union representatives, given the battery supplies half of the smelter's coke needs.

"The situation is alarmingly critical, arguably the worst in 30 years. The workforce is riddled with anxiety over potential job losses and the company's uncertain future," remarked Roman Bečica, chairman of the Liberty Ostrava steelworks union. He added that the current staffing level is untenable for the operation of just one furnace.

There are emerging reports of Liberty delaying invoice payments by one to two months. Among its creditors is Tameh Czech, to whom it owes for energy provisions. This isn't a new problem; the company faced similar issues in the spring when Tameh Czech threatened to halt supplies. While Liberty managed to clear part of its debt back then, it's once again grappling with mounting dues. Further complicating matters is the fact that Liberty is in debt to the state. The company had borrowed a substantial amount from the now-defunct German bank, Greensill, which went under during the 2021 COVID pandemic. Now, creditors are looking to the state insurer EGAP, which had guaranteed the loan, for reimbursement.

According to Liberty's new spokesperson, Katerina Zajickova, negotiations concerning the Greensill debt are in an "advanced stage." However, Hospodářské noviny notes that this phrasing has become all too common in Gupta's recent communications. The Greensill collapse, which underpinned the financing of both Liberty Steel and its parent GFG Alliance, remains a major concern. "Greensill's downfall, which left it in multi-billion dollar debt, is currently under scrutiny by the UK's anti-corruption watchdog," the publication highlighted. Gupta took ownership of Liberty Ostrava in 2019, purchasing it, along with other European assets, from steel magnate ArcelorMittal. Unfortunately, much of his tenure coincided with a downturn in the steel market, barring a brief period in 2021 and parts of 2022 when sales surged by 109%.

Despite these challenges, Liberty has so far honored all its collective agreement provisions, with no reported wage payment delays. Yet, Petr Slanina, the union representative on the company's supervisory board, suspects a strategic shift from the management—possibly gearing up for significant layoffs. If true, this would entail substantial severance packages for many of its longstanding employees. Negotiations for a new contract are set to commence later this month.