Dairygold has announced that it has started negotiations with representatives of 400 staff in its dairy-processing plants with a view to cutting its labour costs and introducing what it described as "a new competitive pay structure".
Mr Tim Healy, head of Dairygold's milk-processing division, said the co-op, based in Mitchelstown and Mallow, Co Cork, broke even last year after losses in 2002, but it needed to radically improve its level of operating profit to allow it to reinvest.
"The division's cost base is still substantially out of line with that of its competitors - we have established that our labour costs account for a significant proportion of this competitiveness shortfall and we must address this now."
Failure to address labour costs would threaten job security and the milk-processing viability, he added, and the company had initiated dialogue with staff and union representatives.
"Dairygold's milk-processing division faces a stark choice - we can make our cost base competitive and maximise our throughput in our plants or we can become a seasonal producer of low- value commodities during the peak milk-supply season only. The first option delivers long-term viability and employment security, the alternative does not."
Dairygold's chief executive, Mr Jerry Henchy, last November said he would like to see the co-op reduce its milk-processing plants from four to one or two but yesterday a Dairygold spokesman denied the review would automatically lead to plant closures.
All 10 Dairygold board members were yesterday warned in a letter sent to them by the Mitchelstown Business Association that many people in the town were beginning to believe they had abandoned their role in decision-making in the co-op.
The association's chairman, Mr Tony Lewis, said that view came amid a real fear in Mitchelstown that further rationalisation was imminent and more jobs would be lost in addition to the 1,000 already lost.
Mr Lewis said the rationalisation strategy extended to the closure of profitable enterprises such as the bacon-processing plant - which closes on October 29th - without any reference to the socio-economic consequences and without examining other options.
A Dairygold spokesman said changes already implemented were necessary to improve competitiveness and efficiency and ensure that the business survived.