The Traun factory of Carrera Optyl, bought by Safilo in 1997, will be closed gradually between January and May, 1994, leading to the layoff of all its 473 workers, but Safilo has agreed to spend a total of €8.65 million, three times more than the amount required under Austrian law, to soften the impact of this radical measure. The local labor unions had threatened to bloc the planned transfer of the plant's machinery and equipment to 2 of Safilo's 3 factories in Italy, although the unemployment rate in the area is not that high, but after 3 weeks of negotiations, Giannino Lorenzon, vice president of Safilo, agreed to put €5.8 million into a fund to help the neediest workers and to facilitate retraining.

Safilo had announced its plans locally last Nov. 6, without informing the international press, pending the negotiations with the unions. The Austrian factory, which has a production capacity for 5,000 metal frames a day, has been manufacturing excessive volumes since the 2nd half of 2002. Its production should have been lowered to 2,000-3,000 units daily to be in tune with the international demand for metal frames, which has declined by about 30 percent since one year ago, affecting Safilo's Italian plants as well. In the end, with the demand for these products giving out no signs of a possible cyclical recovery, Safilo has preferred to pay the price to consolidate the group's production of wires and other metal components in its factory in Udine and the assembly of the frames in its main factory in Longarone.

While workers' wages are about the same in Italy and Austria, the cost of making tools and moulds is much higher in Austria. Furthermore, the greater flexibility of the Italian labor market, which has been augmented by new legislation introduced in 1996, has been a key factor in the move. In Italy, where Safilo and other large eyewear groups work with many small third-party subcontractors in the Belluno region to help smooth out the peaks and valleys in the market and for special items, Safilo has already reduced the production of metal components and frames by cutting back the number of temporary trainees working at its own plants. On the other hand, Safilo admits that it has trouble responding to the strengthening demand for plastic frames, which are made in Italy and at Carrera Optyl's factory in Slovenia.

Safilo bought Carrera Optyl and its two factories in Austria and Slovenia from the Bauer family 6 years ago as part of a deal to take over its coveted Christian Dior license as well as the Carrera brand of sports glasses. Dior still has a nominal stake of 5 percent in Carrera Optyl as part of the licensing deal with the French fashion house, which is due to expire in 2008. In addition to Dior's metal frames, the Austrian plant had taken up the manufacture of many other lines of Safilo, including Gucci for example.

The buoyant market for metal frames had led Safilo to invest more than €7 million in its Austrian facilities and to boost its workforce in recent years. Austria's largest eyewear manufacturer, Silhouette, which was previously financially related with Carrera Optyl, has also raised the number of its employees at its own factory in Linz over the last 5 years, taking it up from 650 to 940 persons over the period, and it has no plans to change its manufacturing apparatus. Safilo is keeping its non-manufacturing units in Austria - Carrera Optyl Brillen, Carrera Marketing and Safilo Austria. Safilo continues to make its cheaper lines in Asia, using for the most part the resources of a Chinese company, Elegance, in which it has a stake of about 20 percent.