Ispat Nová huť, the Czech Republic's largest steel producer, was bought by a foreign investor in 2003, and a fifth of the workforce is to be cut by 2005. During 2004, the new management has taken a number of measures that trade unions at the firm see as an attack on their position, and enterprise-level collective bargaining has broken down.
Ispat Nová huť, in the Czech Republic’s industrial heartland of Ostrava, is the country's largest steel producer. The state’s stake in the firm was sold to LNM Holdings at the start of 2003. LNM Holdings is registered in the Dutch Antilles and forms part of the LNM Group, the second-largest steel producer in the world, which has bought up state stakes in steel producers in several post-communist countries (eg Kazakhstan, Romania and Hungary). The purchase contract for Ispat Nová huť provided for the redundancy of roughly 20% of the workforce by 2005.
The new Ispat Nová huť had a successful year in 2003, achieving very good results partly thanks to the current steel boom. That was reflected in workers’ wages, which are unequalled in the high-unemployment region of Ostrava. The wage levels, though, are also thought by experts to result partly from long-term pressure applied by a large, close-knit trade union organisation at the firm, which has 8,000 members out of a workforce numbering just under 11,000. Since 1990, the trade union organisations operating at the company have been centrally represented by an 'enterprise trade union council' (Podniková odborová rada, POR). This has been headed by a stable and widely respected leadership, which formed the core of a team that negotiated the wage issues in the company's collective agreement.
In 2004, the trade union leaders have run into conflict with the firm’s management. The outcome so far is that consensus has not been reached on wage increases and bargaining over a new collective agreement has foundered.
Ispat Nová huť management has taken several steps since May 2004, interpreted by the unions as an attempt to break their unity. Management:
- succeeded in getting more than 800 union members to withdraw their signatures of support for a planned strike, which then had to be called off at the start of June 2004;
- withdrew its financial donations to the trade union organisations at enterprise and plant level;
- stopped deducting union membership dues from wages and paying them into the unions’ account; and
- launched collective bargaining directly with a number of plant-level organisations that split from the POR
The trade unions appeared to be caught off guard by these actions and at a loss to find an effective defence, finding cancellation of the check-off arrangements for union dues (implemented in July 2004) particularly damaging. The unions’ bargaining power at enterprise level was weakened, with four plant-based organisations splitting from the POR and now seeking to negotiate their own collective agreements separately. The methods by which management had usually communicated with trade union representatives at enterprise level and negotiated collective agreements were sidelined.
In preparation for the main wave of planned redundancies in 2005, management - without consulting the trade unions - informed employees in October 2004 that if they applied for their employment to be terminated by agreement they would receive severance pay far exceeding the norm, amounting to 25 times their average monthly wage. This offer evoked enormous interest, with 1,000 employees applying for the scheme so far.
Commentators believe that the Ispat Nová huť case has more than mere local significance. The Czech Republic is going through the new process of establishing contacts between foreign investors and their new employees (usually represented by trade union organisations), especially in large enterprises in which the majority share has hitherto been held by the state. It appears that collective bargaining on wages and benefits is starting to be shaped by the different customs of the bargaining parties, with one or the other party often finding itself taken by surprise.