December 10, 2008

Mining company Rio Tinto cuts 14,000 jobs

British-Australian mining company Rio Tinto said it would it would cut its workforce by 14,000, due to the global economic downturn.

The job cuts include 8,500 contracted positions, The New York Times reported Wednesday.

The company said unprecedented rapidity and severity of the global economic downturn had reduced the demand for raw materials. The company said it would realize an annual savings of $2.5 billion by downsizing.

Severance pay to laid-off workers would amount to $400 million, Rio Tinto said.

Oddo & Cie analyst Luc Pez said the move was not very surprising in the wake of BHP Billiton's recent decision not to pursue an acquisition of Rio Tinto.

The layoffs were predictable given the focus on reducing debt after BHP abandoned its offer, Pez told the newspaper.

Mining companies are apt to follow industrial companies' lead.

The world's largest steel producer, ArcelorMittal, said in November it would cut production by one-third temporarily, due to decreasing demand, while Swedish ball bearing maker SKF said it would eliminate 2,500 jobs while the economy slowed.