Saudi Binladin Group to Lay Off 50,000
May 02 2016 - 9:30AM
Dow Jones News
DUBAI—Saudi Binladin Group will lay off 50,000 people, according
to a person briefed on the plans, as the construction giant
attempts to turn around a business hammered by low oil prices.
The scale of the downsizing means the Jeddah-based conglomerate
will cut about a quarter of its workforce. The people who were laid
off, mostly construction-site workers from Asia, have been paid
their outstanding salary and dues, according to the person familiar
with the situation.
"The people laid off are not thrown in the street without pay,"
this person said. "The Saudi Binladin group is extremely careful in
honoring its commitments."
A spokesman for SBG said the employees who were dismissed would
receive full compensation and other entitlements.
"Adjusting the size of our manpower is a normal routine
especially whenever projects are completed or near completion,"
said a spokesman for SBG. "Most of the released jobs had initially
been recruited for contracted projects with specific time frame and
deliverables," he added.
In the oil-rich nation's boom years, Saudi Binladin flourished
as one of the government's preferred builders, tasked with
multibillion-dollar projects, such as in the holy cities of Mecca
and Media. But as governments across the oil-rich Persian Gulf,
including Saudi Arabia, have slashed spending on large-scale
projects to plug their growing budget deficits caused by the drop
in crude prices
Creditors and advisers to SBG have said that one of the main
reasons behind the company's financial woes stem from the Saudi
government's failure to pay for completed or ongoing construction
work. SBG in recent years has completed work on multiple
multi-billion-dollar government projects, including hospitals,
universities, highways and the extension of the holy mosque in
Mecca.
"There are many projects where payments haven't happened or
where there has been a delay in paying the laborers," said the
person familiar with knowledge of the SBG plans. "Some of these
projects are coming to an end or running slow, so as a company you
adjust and reduce the fixed costs among other things," the person
said.
The Saudi ministry of labor wasn't immediately available to
comment.
Besides reducing the head count by a quarter, the company will
also look at streamlining its operations and boosting its
efficiency, the person said, declining to be more specific. Most
recently, SBG recruited a Morgan Stanley banker as its new chief
financial officer, as well as an executive from Kuwait contractor
Kharafi National to join its management.
The job cuts, which were first reported by Saudi media,
coincided with riots in Mecca during the weekend. Pictures and
footage circulating on social media, which couldn't be
independently verified, showed angry protesters setting buses on
fire. A spokesman for the Mecca Civil Defense confirmed they had to
extinguish fire in seven buses and that an investigation was under
way. He declined to say whether the protesters belonged to the
Binladin Group.
Demonstrations in Saudi Arabia are rare. But the group's
financial trouble has sparked previous bouts of labor unrest. In
February, hundreds of Binladin workers took the streets to demand
unpaid wages.
Saudi Binladin was founded 85 years ago by the father of the
late al Qaeda leader Osama bin Laden. The company enjoyed close
ties with the Saudi leadership, but those relations have been
strained after a crane collapsed on the holy mosque in Mecca,
killing over a hundred pilgrims. The firm was then barred from
taking on new projects.
Ahmed Al Omran contributed to this article.
Write to Nicolas Parasie at nicolas.parasie@wsj.com
(END) Dow Jones Newswires
May 02, 2016 09:15 ET (13:15 GMT)
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