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Restructuring measures

Following the global financial crisis, Wärtsilä began adjusting its capacity and cost structure in May 2009 to reflect lower demand. These efforts were intensified in January 2010.

The first steps taken were to reduce the number of jobs in Ship Power, the business that had been the most severely hit by the market downturn.

In January 2010, measures continued by starting the adaptation of manufacturing capacity to both the structural changes in the market and to a lower demand environment. Some of the manufacturing capacity has been moved to China and two factories in the Netherlands are in the process of being closed. New and more efficient ways to operate have been introduced, thus enabling the closure of smaller units and the consolidation of operations to larger entities in various countries, as well as the consolidation of manufacturing close to growing markets. Temporary lay-offs have mainly been used in Finland and Norway. Lower capacity utilisation has also triggered an adaptation of all Wärtsilä's global staff functions with the aim of streamlining processes, decreasing overlaps, and improving the cost efficiency. Wärtsilä initiated processes to reduce approximately 400 jobs globally in its support functions during the fourth quarter.

Through all of these measures initiated in different phases, Wärtsilä is reducing the number of personnel by approximately 1,800 employees.

When fully implemented, it is estimated that the reductions will decrease costs by approximately EUR 130 million, which is slightly higher than previously anticipated. Of these cost savings, about EUR 60 million have materialised by the end of 2010. The remainder of the savings will gradually materialise during 2011. Wärtsilä anticipates that the majority of these cost savings will be permanent.

The total nonrecurring costs related to the restructuring will be approximately EUR 150 million, somewhat higher than previously estimated. From the costs, EUR 40 million non-cash write-offs were recognised in 2009. In January-December 2010, Wärtsilä recorded EUR 75 million nonrecurring items related to restructuring measures. The remainder of the costs will be recognised during the first half of 2011.