Itella to implement new postal sorting technology in 2010

While the four post centers will be given a more prominent role, operations will continue in all sorting units in Finland

Temporary lay-offs at Vantaa logistics center will be cancelled until the end of the year

• Itella is laying the foundation for a modern postal system in the future through a comprehensive development project it launched in 2007. This will ensure that all Finns will continue to receive high-quality postal services.
• By the end of next year, new sorting technology will be in use at four locations in Finland: Oulu, Kuopio, Tampere and Helsinki. According to the development plan, the new sorting equipment will, in addition to the current first-class letters, handle all domestic addressed direct marketing and second-class letters as well as part of the magazines. 
• The other sorting centers (Lappeenranta, Turku and Seinäjoki) will continue their operations, focusing mainly on collecting shipments, receipt and sorting mainly first-class letters. Moreover, operations will continue at the terminals in Jyväskylä and Mikkeli as well as in Kajaani and Rovaniemi, where statutory labor negotiations were completed in August.
• The reform will take place over a period of 18 months. The estimated increase in efficiency will correspond to 360 man years by the end of 2010. During the long transition period, it will become clearer how much of the efficiency increase can be achieved through natural turnover of labor, pension plans or transfers to other tasks within Itella. Experience from earlier reforms shows that many have found new jobs.
• The postal industry is facing the greatest structural change in its history with the increase of e-communications and the European postal market being opened for competition at the beginning of 2011. Itella has being prepared for the new situation for some years already by maintaining a continuous dialogue with its employees.
• The soon completed development and investment project constitutes part of the preparations for the structural change. The EUR 160 million investment comprises the new sorting technology, the construction of two completely new postal centers (Oulu and Kuopio), and the expansion of two centers (Tampere and Helsinki).
• The ongoing temporary lay-offs at the Itella Logistics center in Vantaa will be cancelled until the end of 2009. The total volume of parcels and cargo is expected to increase to the extent that the lay-offs are not needed during the rest of the year. These lay-offs concerned 410 people and were planned to be implemented between May 2009 and April 2010. The maximum planned duration of the lay-offs was 30 working days per person.
• The newly implemented changes will have no effect on the postal deliveries or the service at the postal outlets in Finland.

The new systems, scheduled to become fully operational in 2010, will make automatic sorting faster than before. The adoption of this new system in combination with decreasing letter volumes means that sorting has to be centralized. According to plan, four locations will mainly sort deliveries that do not have to be handled overnight, in other words, that do not need to be delivered the following day after being sent. Such deliveries are second-class letters, direct marketing material, and some magazines.

In addition to the four locations mentioned above, mechanical sorting is in place in Turku, Lappenranta, and Seinäjoki. According to plan, there will be sorting operations in these locations in the future as well, but the operations will focus mainly on picking, receipt, and sorting of primarily first-class letters. Parcel sorting will continue in the same locations as today: Turku, Seinäjoki, Tampere, Jyväskylä, Oulu, Kajaani, Rovaniemi, Kuopio, Mikkeli, Lappenranta, Vantaa, and Lahti.

As a consequence of the reform, it is estimated that the increase in efficiency will correspond to about 360 man years in 2010. Postal sorting generates work corresponding to 2,100 man years, which equals 2,355 full-time employees. Next year it will be clearer how much of the efficiency increase can be achieved during the long transition period through natural turnover of labor, without resorting to terminating employments. The introduction of new technology will change tasks at all sorting centers as well as change, in one way or another, the tasks of all postal sorters, and therefore statutory labor negotiations will be initiated. The negotiations beginning next week will concern all employees within the sorting operations. Itella and the Finnish Post and Logistics Union that represents the employees have agreed on extending the statutory period for negotiations. The negotiations will end in January 2010.

Preparing for a structural change within the industry

The postal industry is experiencing a major structural change. Letter mail within Europe will be opened to competition at the beginning of 2011, which will shake up the entire field of postal enterprises. Letter deliveries in the major Finnish cities are expected to become an object of competition. Another major development trend is that the traditional letter is being replaced by electronic communication as part of the developing information society. The digitization of invoices will have the greatest impact. All of this will unavoidably affect the jobs that Itella offers within postal deliveries and sorting.

Itella has been systematically preparing for these structural changes for quite some time. Itella's objective is to be more efficient, better and more competitive than before in the changing market.

Part of the preparations for change is Itella's current investment project. Another major reform is the new productivity-based salary and working hours model that was generated and implemented in cooperation with the workers' union and the employees. Over the past two years, postal sorting and deliveries have managed to increase the efficiency of the work input by up to one thousand persons. This increase has been achieved without terminating any employments. Furthermore, administration has been rationalized. This action, however, has also required permanent lay-offs

Jukka Alho, President and CEO:

- The postal industry is facing the greatest structural change in its history. We have been able to prepare for the change gradually, in close dialogue with the employees. This has made it possible to avoid major redundancies. Itella still employs about 23,000 persons in Finland.

- We have also listened to and heeded society's messages regarding preserving jobs. Nevertheless, Itella has had to and will have to reduce its workforce. We have to stay competitive, otherwise customers will choose another service provider. We can see the Swedish Postal Service entering the Finnish parcel deliveries market. An international postal order company usually chooses the cheapest service provider to be its partner, even if the price difference might be just a few cents. As there is less work, there will also be fewer employment opportunities. For Itella, it is important to be competitive in all circumstances.

Jarmo Niemi, National Chief Shop Steward for Postal Delivery and Transport:

- It is sad that jobs are being lost as a result of changes that will happen in the future. We will hardly be able to avoid letting people go. For the employees, there is, however, the change security agreement from last spring, which mitigates the effect and even gives room for individual solutions. The agreement has been used in a number of situations, including in Rovaniemi and Kajaani, where after the statutory labor negotiations, 49 people were let go. The current situation means that less than ten people will be left without a job, and the situation may even improve before the redundancies are set to take place.

- I hope that the negotiations that start next week will be carried out in the same positive, cooperative spirit laid out in the new Act on Cooperation within Undertakings from 2007.

Itella's employee numbers per location

Itella is one of the biggest corporate employers in Finland, employing about 23,000 people in all regions of the country. Jobs within Itella are in a constant natural flux, which makes reform projects easier. In 2008, the natural turnover among Itella's employees in Finland was 2,100 persons, while this year's estimate is 1,350 persons.

Next year's rationalization measures will decrease the number of jobs within Itella by a little more than 2%.

Estimated changes in those locations where changes in jobs are expected:

For further information, please contact:
- Jukka Alho, President and CEO
- Kari Kivikoski, Director, Mail Communication

Please direct interview requests to the above-mentioned persons at tel. +35820 452 3366 (Itella MediaDesk) or +358400 947 855 (communications manager Ulla Parviainen).

- Jarmo Niemi, National Chief Shop Steward for Postal Delivery and Transport, tel. +358400 523 551

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