Codelco's next CEO faces delicate balancing act with Chilean unions

Wed Jun 18, 2014 6:49am EDT
 
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By Alexandra Ulmer and Fabian Cambero

SANTIAGO (Reuters) - The next CEO at Codelco, the world’s No.1 copper producer, will have to walk a tightrope between avoiding conflict with its powerful unions over expected layoffs while pursuing aggressive investment and cost-cutting plans.

The board of the Chilean state-owned mining company, reformed under new center-left president Michelle Bachelet, earlier this month sacked chief executive Thomas Keller, a tough businessman seen close to the former conservative government.

Codelco [CODEL.UL] is now on the hunt for a CEO with strong mining credentials as well as the ability to work with the company's workforce and unions.

The company has stressed it is striving to mend tense relations with unions via dialogue but that "sacrifices" will be required "on all sides," without giving details. Union leaders have welcomed the detente.

The future CEO's acid test will be the $4.2 billion transformation of the giant open-pit Chuquicamata mine into an underground mine, a costly and complex operation which would harm the poor, mining-dependent city of Calama.

The jobs of about 2,150 workers, or about a third of the current workforce, are poised to be gradually phased out by 2016 as falling ore grades make the open pit unprofitable.

Chuquicamata's workers in 2012 agreed to a new contract, including bonuses and loans worth about $42,000 for each worker, in return for signing off on a voluntary layoff package.

The catch is that only a couple of hundred workers have since volunteered under the layoff program, which means that at the current rate the company will fall well short of its job cuts target. It is unclear whether the future CEO will be open to sweetening the exit package on offer, which varies based on a worker's profile, and just how much that would cost Codelco.   Continued...

 
A worker checks a shipment of copper inside the plant at the copper refinery of Codelco Ventanas in Ventanas city, about 164 km (101 miles) northwest of Santiago, April 16, 2012. REUTERS/Eliseo Fernandez