The union for workers at an Otago wool mill says the company is cutting a shift and shedding jobs.
Summit Wool Spinners, owned by a Japanese firm, has some 250 staff and is one of Oamaru's biggest employers.
The company has begun discussing redundancies in response to a drop in demand for carpet fibre.
An organiser with the Engineering, Printing and Manufacturing Union says workers have agreed to the company dropping one of the four main shifts. He says the workers feel it is the best deal possible.
John Gardner says the company has called for voluntary redundancies, but it is too early to say how many jobs will go.
Summit Wool Spinners confirmed it is working through job reductions, but would not go into detail.
The company is struggling with the same economic challenges that have affected the whole wool processing sector. They include falling demand for carpet and other woollen goods, increased competition from synthetic carpet manufacturers and the erosion of export returns by the high New Zealand dollar.
Summit Wool Spinners, which describes itself as New Zealand's largest independent carpet and rug yarn spinner, has not confirmed the extent of cutbacks it is seeking at this stage.
But it is talking to staff this week after signing a new collective agreement with the Engineers and FIRST unions.
Mr Gardner says the agreement retains conditions such as a rotating 12-hour shift, but also recognises the difficulties facing the company and the sector.
Mayor says community has confidence in mill
The mayor of Waitaki District is confident the Summit Wool Spinners plant in Oamaru will recover despite plans to cut shifts and shed jobs.
Alex Familton says the redundancies are being handled well and the company is poised to bounce back once demand for its products increase.
Mr Familton says the community still has confidence in the company.
"The economic downturn won't last forever - they know that and they are managing in such a way that they're making a very sound base to spring back into the system when the opportunity arises."
The mayor says the plant has been running for more than 100 years and is one of the South Island town's biggest employers.
