Closure of Fujitsu Siemens plant – a repeat of Renault Vilvoorde?

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Fujitsu Siemens decided in December 1999 to shut down a profitable computer assembly plant in Finland and move its production to Germany. Following the closure (attempts to find a prospective buyer failed), 450 employees will be dismissed by the end of March 2000. The employees are now asking whether laws and agreements have been violated, as in the case of the closure of Renault Vilvoorde in 1997. However, it is clear that nothing will prevent closure, though the significant electronics industry cluster that has been established in Finland should provide work for those made redundant.

Fujitsu Siemens, the German-Japan ese joint venture, decided in December 1999 to shut down a profitable computer factory located in Kilo, Finland, by the end of March 2000. In consequence, 450 employees will be dismissed. After the announcement, a successor was unsuccessfully sought to continue the factory's operations. Trade unions were completely powerless when the management decided to centralise its production in the Augsburg and Sömmerdan units in Germany, closer to the market.

The Kilo case has been compared to the 1997 closure of Renault's Vilvoorde plant (BE9703202F and EU9703108F), where the motor manufacturer's plant in Belgium was shut down by a decision made in France.

Background

The roots of Finnish computer production date back to the 1960s, when production started at the Kilo factory. In 1991, the Finnish-owned Nokia sold its computer-producing subsidiary Nokia Data to the British-run ICL, which was itself part of a Japanese group. At that time, the deal was seen as the salvation of Finnish computer production, which was floundering in the economic depression. In 1996, Fujitsu acquired the computer operations of ICL, and Fujitsu ICL Computers took over responsibility for the Kilo plant. The centralisation continued in 1999, when the European activities of Fujitsu were united with the computer operations of Siemens.

In autumn 1999, when Fujitsu and Siemens announced that they would establish a new joint venture uniting their European production under a single company, they affirmed that production would continue as before. The management of Fujitsu ICL boasted that the productivity, skills, all-round competence, product quality and throughput at the Kilo factory were among the best in the group. The workers declared that, although they were informed during autumn 1999 of possible changes, they did not anticipate the final closure decision: its announcement came as a surprise to them. According to the chief shop steward, the employees tried to establish direct negotiating contacts with the top management, but the management refused to negotiate, on the grounds that Finnish legislation did not apply because the company headquarters was located in Germany.

The Kilo factory was profitable, and the employees had consented to adaptations of sectoral terms and conditions through local agreements for the sake of achieving better results. Different kinds of flexible working time arrangements, external labour and fixed-term contracts had been used in order to optimise production. According to the workers, production could have been doubled if a switch to two shifts had been organised. Orders had been filled on time, production records had been broken, and personal computers had been produced more cheaply than in Germany.

Investigation request submitted

The Metalworkers' Union (Metalliliitto) has asked the Ministry of Trade and Industry and the Ministry of Labour to find out whether the company has complied with the conventions and regulations of the International Labour Organisation (ILO) when deciding on the future of the plant. Also, an investigation was called for as to whether the EU Directive on European Works Councils was followed and whether the procedures of the company were in line with the Organisation for Economic Cooperation and Development (OECD) guidelines for multinational companies.

At this stage, the Minister of Trade and Industry, Erkki Tuomioja, has already admitted the fact that, as a company in an open market economy may organise its operations through its own decisions, there is little that the government and the Ministry can do directly to influence such decisions. The preliminary fact-finding report of the Ministry of Labour states that no laws, agreements or Directives have been violated. The follow-up report is under preparation.

Finnish closure regulations different

This case has once again aroused discussion on the implications of foreign ownership. Many Finnish companies have been bought by non-Finnish owners, and Fujitsu Siemens is one example of what may happen when the head office and ownership are in another country. Production is arguably moved where the tax benefits are greatest, closer to the markets, and to countries with a cheaper labour force. When production is being rationalised, and greater profitability or improved returns for shareholders are being sought (analysts have demanded a cut in Siemens' costs), then production units are located on these grounds. According to Mauri Kavonius, a researcher at the Metalworkers' Union, "Finland has one of the most flexible and cheapest systems in Europe as regards the costs incurred in company closures, dismissals and lay-offs. There exist in Finland collective systems that bear the costs arising from these measures. In many countries, companies have to take care of unemployment benefits themselves over a long period. In Finland, this is done through collective unemployment funds financed from membership contributions and public resources. Also in the case of severance pay, in many countries the company itself has to compensate the worker in connection with a dismissal" (quoted in Ahjo 1/2000). Against this background, it seems easier to close down units in Finland, even if they are more profitable.

National interests and globalisation

As the internationalisation of business proceeds, it raises the issue of the extent to which trade unions should think "selfishly" where jobs in their own country are concerned. It has been alleged that Siemens did not have the courage to rationalise its units in Germany, for fear that the IG Metall metalworkers' union would make a great fuss about it. For the Finnish trade union movement, an important measure to address such developments lies in changes in the EU machinery. The Finnish Metalworkers' Union demanded in December 1999 that the Gyllenhammar report concerning industrial restructuring, which was submitted by the "high-level group on economic and social implications of industrial change" (EU9805106N) to the European Commission in November 1998, should be dealt with soon and that decisions should be made on its recommendations.

In the Metalworkers' Union's view, the Fujitsu Siemens case indicates that the "civilised" regulations recommended by the Gyllenhammar report are needed urgently within the EU. The report emphasises that such industrial restructuring should be conducted in cooperation with the workers, in order to seek other alternatives, and that companies and groups should bear more responsibility for the future of workers facing the pressure of structural changes. The union sees the OECD and ILO procedural guidelines for multinational companies in this kind of situation as calling for a different kind of approach than has been taken in the Fujitsu Siemens case, and it is considering further proceedings. Up until now, it has been content to await the results of the Ministries' investigations. It may be, too, that the access of the workers concerned to new jobs is calming the atmosphere in the trade union movement: a blessing in disguise in this case is that they have good chances of finding jobs in other companies, due to the extensive electronics industry cluster that has grown up in Finland.

The present case has again forced the trade union movement to face up to its weakness in the face of international business decisions. One perspective on globalisation has been expressed by the development manager of the Central Organisation of Finish Trade Unions (Suomen Ammattiliittojen Keskusjärjestö, SAK), Marjaana Valkonen, who advocates the "common, global, basic values" of the labour movement. She analyses globalisation as follows: "Globalisation has been turning the wheels of business above all. It has brought welfare primarily for those who are successful already. So far, it has hardly increased social welfare. This may be the reason why people are very sceptical of the whole development. Many fear that it will increase social inequality, because it has increased social inequality between rich and poor on a global scale. The most glaring consequences of economic competition are poverty and consequent emigration, as well as child labour, forced and slave labour, trampling on women's rights etc. At the national level, intense job competition, for example, is connected with globalisation. Employees feel frustrated and doubt whether the situation can be controlled anymore. The kind of jobs that are not based on advanced skills can easily be moved to another country." Her statement holds good for the Fujitsu Siemens case: the Kilo unit was only an assembly plant, and the activities could easily be moved.

Commentary

The closure of the Kilo plant is a case partly comparable to Renault Vilvoorde, indicating that there is a need for improved information and consultation, especially in the environment of EU Economic and Monetary Union, where the transparency of companies will increase and the competition will get tougher. For these reasons, it will be easier for owners and management to compare profitability between different units. On the other hand, one has to remember that the practical significance of EU information and consultation Directives is very questionable, because the economic realities impose considerable limitations and the power of decision-making will always remain with the management.

The Fujitsu Siemens affair also shows some of the negative effects of globalisation. The opening of frontiers to free trade often means loss of jobs (especially in the present global financial system). On the other hand, consumers benefit from it in the form of cheaper products, for instance. Furthermore, new jobs may be established in new sectors. However, national interests cannot be defended as much as before.

A paradoxical aspect of this development is that even if production at a plant is reduced, it may not be profitable enough from the perspective of shareholders, which leads to the possibility that profitable operations, too, may be wound down.

So far, the labour movement has largely lacked the means of engaging in supranational cooperation. However, it seems that there is no willingness to do this if national interests are under threat. One way to exert influence - as was seen in Belgium in the Renault case - is to harness public opinion. The threat of consumer boycotts and reactions from the public are likely to harm the interests of the shareholders, too. Increased use may be made of such means in the future. So far, the labour movement has been quite toothless in the face of closure decisions. (Juha Hietanen, Ministry of Labour)