Metal sector company Componenta announced on Thursday that it will merge two of its foundries, located in Karkkila, Finland and in the Swedish town of Alvesta.

   

In practice, the Swedish foundry will be shut down, and new investments will be made in the foundry in Karkkila.

   

The decision angered residents in Alvesta, as the closure will leave 120 people in the town of 19,000 unemployed. Componenta has been the town's largest private employer.

   

Around 50-70 new jobs will be created in Karkkila after the foundry merger. The Finnish foundry currently employs 130 people. The most important machine from Alvesta, an automatic moulding machine, will be transferred to Karkkila, which added to the dismay of the Swedish side.

   

The Alvesta foundry was established in 1922. A local trade union representative threatened to demand that Swedish MPs take the matter to the EU Commission for investigation.

Among others, Componenta manufactures cast components

for the heavy trucking industry. Componenta has long suffered from excess capacity, so the decision to close one foundry came as no surprise.

   

The Karkkila and Alvesta foundries are similar in size, and both have operated at a loss for the past few years. Capacity utilisation has also been low. Componenta explained that the decision to invest in the Karkkila foundry was based on its better productivity and quality.

   

Also, Componenta President and CEO Heikki Lehtonen said that the flexibility of labour in Finland, including the possibility for temporary lay-offs without pay, was a key factor in the decision.

   

Fluctuations in demand can be significant in Componenta's sectors. Lehtonen mentioned that 260,000 trucks were manufactured in Europe in 2000, but this year the figure will be 200,000.

Sweden's rejection of the euro

in the recent referendum also played a role in the process, as Componenta wished to avoid losses resulting from an appreciation of the Swedish krona.

   

The foundry merger will create one-time costs of some 13 million euros for Componenta, but the company estimates that as a result of the merger, its net income will improve by five million euros annually beginning in 2005.

   

Componenta's net sales totalled 180 million euros in 2002, and it currently employs 1,700 people.