Nokian Tyres could temporarily lay off 1,000 employees

Company post good Q3 result, but future prospects remain uncertain

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The tyre manufacturer Nokian Tyres has joined the ranks of companies in Finland announcing upcoming cutbacks in personnel.
      According to its third quarter results, released last week, the company earned EUR 71.9 million.
      The result clearly exceeded the median of forecasts collected by Reuters News Agency, which was EUR 62 million.
      The company’s shares went up on Friday by more than two per cent.
     
In spite of the good result, Nokian Tyres announced that it was considering temporarily laying off 1,000 people for the Christmas and New Years holidays at the company’s car tyre factory in Nokia.
      The move is being considered because of uncertain demand on the Russian market.
      Russia accounts for about 40 per cent of sales of Nokian Tyres, and more than half of its result, says CEO Kim Gran.
      The flow of new orders has slowed, which is the result of a sharp decline in car sales in Russia”, Gran says.
     
In addition to Russia, another factor of uncertainty is the arrival of winter. High-quality winter tyres are a cornerstone of Nokian’s profits.
      The volume of demand for winter tyres will not be known until snow has fallen around Finland and other market areas.
      “We are preparing for a situation in which we might have to suspend production at the turn of the year. It would apply to the whole personnel, from the CEO to messenger boys.
     
On the same day, Nokian Tyres made two other announcements concerning personnel matters.
      The production line manufacturing tyres for heavy machinery, could see the temporary layoff of people for about seven to eight months next year.
      In addition, the company is upgrading some of its factory machinery in Nokia, near Tampere. A new machine at the plant affects the work of 70 people. Some of them might have to be let go.
     
The possible temporary layoffs did not come as a very big surprise, as the company’s closest market area, Russia, has seen its economy weaken rapidly.
      The importance of Russia is reflected by the development of the company’s stock market performance. The share prices of Finnish companies began to decline in the spring, when the likelihood of a recession began to grow.
      Shares of Nokian Tyres were still doing well until late September, when share prices collapsed in Russia.
      Gran says that in the past six months, the share prices of Nokian Tyres have followed trends on the Moscow Stock Exchange more closely than those in Helsinki.
      International investors see Nokian Tyres as a Russian company that is managed under Western rules and principles, Gran says.


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