Production cut: Nokian Heavy Tyres reaches agreement
Following negotiations, production will decrease at the heavy tyres plant (Photo: Nokian Tyres)
Nokian Heavy Tyres Ltd. has completed negotiations regarding plans to lower production at its factory in Nokia, Finland. As the tyre maker previously announced, temporary layoffs will affect approximately 160 people.
Negotiations began on 8 May and were prompted by “productional and financial reasons,” specifically a “change in the market and demand situation” and the resulting need to lower production. Following the end of these negotiations, Nokian Heavy Tyres has the option of laying off these 160 or so workers for a maximum period of 90 days per person, with the layoffs implemented during 2023.
Nokian Heavy Tyres employs approximately 400 people in total, including at R&D, retreading, and wheel production facilities. The wording of Nokian Tyres’ initial statement (2 May 2023) regarding adjusting production suggests that the figure of 160 employees represents the entire new tyre factory workforce in Nokia.
Aftermarket slowdown following “record” 2022
The decision to reduce production comes after a “record year” for the operation. “Heavy Tyres delivered the best-ever sales and profitability” in 2022, wrote Nokian Tyres in its most recent Financial Review. Net sales rose 6.1 per cent year-on-year (comparable currencies), to 273.5 million euros, and segment operating profit amounted to 43.8 million euros with a margin of 16.0 per cent. Although the unit cost of raw materials (euro/kg) in manufacturing were up 41 per cent year-on-year and logistics costs “increased significantly,” Nokian reported that “price increases offset raw material and other cost inflation.” Jukko Moisio, Nokian Tyres’ president and chief executive officer, even spoke of “attractive opportunities to continue on a strong growth track” as well as “further improving profitability” within the Heavy Tyres business.
Yet in the same document Nokian Tyres ominously noted that “in heavy tyres the general economic development may have a negative impact on demand in 2023.” By the time the company reported its Q1 2023 results, lower aftermarket volumes had helped drag down Heavy Tyres segment operating profit by 20.7 per cent year-on-year, to 9.6 million euros. The tyre maker also noted high inventory levels within Heavy Tyres distribution networks.
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