Announcement of intent: VDL Castings Heerlen to phase out casting operations
VDL Castings Heerlen plans to phase out operations and cease business activities over the course of 2024. To this effect, a request for advice has been submitted to the Works Council. The employees, unions and Employee Insurance Agency (UWV) have been informed. All of the 140 employees of VDL Groep iron foundry, including approximately 115 permanent staff, will be laid off. The intention is to help them transition from employment to employment, either within a VDL Groep sister company or otherwise. VDL is exploring other activities for the site of VDL Castings Heerlen.
Structural shortage in production volume
Despite the recent emergence of new markets and new customers for castings, VDL Castings Heerlen is facing a structural shortage in production volume. As a result, the company, which mainly produces cast-iron parts for sectors such as the truck, mechanical engineering and rail markets, lacks the prospect of continuity. Updating and renovating the casting processes would require substantial new short term investments with (overly) prolonged cost recovery periods. In contrast, the castings market is actually calling for cost reductions, in turn hindering the necessary increase in production volume. Since the acquisition in 2017, VDL has invested millions of euros in the foundry. New environmental regulations would demand major investments yet again. Due to the dim outlook, these kinds of investments are not justifiable.
Stricter environmental requirements and rising energy costs
The energy transition would require the foundry to switch to electric smelting, which involves a number of inherent uncertainties due to the unreliable availability of the electricity needed. Also in the face of stricter (and at times unachievable) environmental requirements and rising energy costs, an uneven economic playing field has been created. In larger industrialised countries in the EU, companies are receiving support in the form of additional energy subsidies. Outside of the EU, energy prices are lower as the EU sanctions imposed on Russia are not being followed.
An improvement in these conditions is not foreseeable. This has resulted in a lack of sufficient opportunities to secure a healthy future for the foundry. For these reasons, a phasing out of operations and the ceasing of business activities is being planned over the course of 2024.
‘No effort spared’
Director Ruud Pisters of VDL Castings Heerlen: “We have spared no effort to avoid a scenario of phasing out our casting operations. Unfortunately, circumstances do not offer a sufficient outlook for improvement. Needless to say, this will come as a hard blow to our employees who have always shown their full commitment. We will be consulting with the Works Council and trade unions to ensure that our employees transition into a proper place”.
The phasing out of casting operations at VDL Castings Heerlen is likely to continue through to the middle of 2024. This time frame depends in part on how quickly customers will be able to transfer their products elsewhere and on what stock they intend to accumulate beforehand. Due to the gradual phasing out of operations, employees will also be let go in phases.