Otanmäki train factory cuts 117 jobs after tram contract loss

Škoda Transtech will lay off 117 employees at its train factory in Otanmäki, Kajaani, Yle reports. The cuts follow the company’s loss of a contract to supply trams for the City of Helsinki.

The factory had about 600 employees before the change negotiations began in May. The company initially estimated that the decline in work could affect up to 200 employees.

The Otanmäki factory has been a major employer in the Kainuu region since it began operating in 1986. Its history has included temporary layoffs, redundancies and prolonged uncertainty over its future.

Factory founded for former miners

Production of specialised train cars began in Otanmäki and Taivalkoski in 1986. The area of Otanmäki was then part of the municipality of Vuolijoki, which was later merged into Kajaani.

State-owned Rautaruukki’s mines in Otanmäki and Murtovaara in Taivalkoski had closed the previous year, leaving former mine workers in need of jobs. At the same time, the Soviet Union needed train cars.

The business soon ran into difficulties. Around 400 train cars were left rusting on Finnish railways because the Soviet Union could not pay its bill. Trade with the east collapsed after the dissolution of the Soviet Union.

In 1991, Rautaruukki Transtech temporarily laid off 700 employees at its factories. The company later dismissed a total of 170 employees from the Otanmäki and Taivalkoski factories and its office in Oulu in 1994 and 1995.

In the municipality of Vuolijoki, which had about 3,000 residents at the time, tax revenue fell by one third and unemployment approached 40 per cent. In 1998, 120 employees were dismissed from the Otanmäki factory and 15 from the Oulu office.

The train factory in Murtovaara, Taivalkoski, faced the threat of closure for years, while its employees were repeatedly laid off. The factory eventually found a buyer in 1998, helping Taivalkoski avoid unemployment of 40 per cent.

Years of state support

The establishment of the train factory was strongly questioned in Finland’s Parliament. Critics compared it with Valco, a joint project between the state-owned company Salora and Hitachi that never became profitable.

The state supported the factory’s operations with tens of millions of Finnish marks and urged VR, Finland’s state railway company, to order train cars from Otanmäki. When trade with the Soviet Union collapsed in the early 1990s, the state gave Transtech 50 million marks in support.

Ownership of the factory passed to Spain’s Talgo in 1999, but the factory still failed to become profitable. The state again urged VR to place orders with Otanmäki.

Talgo later competed to manufacture trams for Helsinki but lost to Switzerland’s Stadler. The same company was also selected this year as the supplier of carriages for Helsinki’s public transport.

The Finnish Pritech Group bought the factory in 2007. It received orders for trams and commuter trains from Helsinki’s public transport operator and began manufacturing restaurant cars for VR.

Another problem emerged in 2014, when Russia occupied Crimea and the factory could no longer obtain all the parts needed to manufacture trains from Russia.

Workforce grew under Škoda

In 2015, Škoda Transportation Group bought the factory from its Finnish owners. The workforce grew, and the factory received orders worth hundreds of millions of euros.

It manufactured trams for Helsinki, Tampere and Mannheim in Germany. VR also ordered sleeping cars.

The factory’s future was no longer considered an immediate concern. Instead, the company faced a labour shortage and began recruiting workers as far away as the Philippines.

The latest cuts mark the first large-scale redundancies at the factory since Škoda became its owner.