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In October 2003, the European management of Ford announced that 3,000 jobs would be cut at its car assembly plant in Genk, Belgium, with Ford Europe's major financial losses cited as the immediate reason. A previously announced investment of EUR 900 million in the factory will not be made, and trade unions fear that the plant faces extinction. Negotiations are underway over a social plan to accompany the redundancies, and the company has stated that it will produce two new models at Genk.
After the closure of the Renault plant at Vilvoorde in 1997 (BE9703202F), which led to the loss of 3,100 jobs, in late 2003 a new shockwave is going through the Belgian car assembly sector. In October, Ford's European management announced that one in three jobs at its Belgian plant at Genk in Limburg (BE9809244N) is to be cut by March 2003. The decision comes against the backdrop of poor operating results for the US-based Ford, both in Europe and in general, and forms part of a worldwide workforce reduction of 23,000. A previously announced investment of EUR 900 million to make the Genk plant suitable for the production of four models will not be made. The Ford job cuts are a further blow for the Limburg area (in the Flemish region), following the 2002 decision to close the Philips electronics factory at Hasselt, with the loss of 1,100 jobs.
The automotive industry in Belgium
The automotive industry has a long history in Belgium. As far back as the 1920s, the largest foreign constructors of cars were already present in the country. However, due to growing European unification, since the 1960s many assembly plants have lost their reason for existence. Car assembly has been thoroughly rethought and a few sites have been successfully converted into important production plants which can supply the entire European market.
In 2003, there are four constructors of passenger cars in Belgium: the German-based Volkswagen (BE9905176F), Ford, Volvo (part of the Ford group) and the US-owned General Motors (GM)/Opel (BE0109301F). Together they provide over 26,000 jobs. However, during the period 1992-2001, the total number of jobs in Belgian car assembly fell by 30%, while the added value fell by 8%. Direct employment at Ford Genk decreased during this period by 42%, though the introduction of so-called 'lean production' at both Ford and Opel created additional jobs at suppliers. With about 9,000 employees, Ford Genk is currently one of the largest employers in the Limburg area, though the workforce had already been greatly reduced prior to the latest cuts - between 1992 and 2002, some 4,500 jobs were lost.
In 2002, approximately 1 million passenger cars were built in Belgium. The country has one of the world's highest per capita productions of cars, at around 100 cars per 1,000 inhabitants per year. The greater part of the production (96%) is destined for export. The Belgian automotive industry is important not only in terms of the direct employment it provides, and the number of jobs at suppliers is also considerable. In general, it is assumed that two jobs in car assembly create one job in the direct supply chain.
Restructuring at Genk
At the beginning of October 2003, management at Ford Genk convened an extraordinary works council meeting to provide new information about Ford Europe's future intentions for the plant. Jan Gijsen, the site's operations manager, explained the unpromising business situation, with the Ford group badly hit by the deteriorating economic climate, resulting in considerable financial losses. According to Mr Gijsen, these losses were the immediate reason for starting a review of all investment plans, aimed at improving the group's business structure.
The consequences of this group-wide review for Ford Genk arise above all from a decision not to make planned investments to enable production of a new Focus model at the site. Ford now wants to concentrate the production of the Focus at two, rather than three plants. Genk would, however, remain the production site for assembly of all versions of the current Mondeo. However, given the production prospects of this model, which has not proved very successful, a two-shift system would suffice instead of the current three shifts.
As a result of these plans, Ford Genk will have to deal with a surplus of about 3,000 employees - 2,900 blue-collar workers and 100 white-collar workers. Genk management therefore announced the collective redundancy of 3,000 employees, to start between the end of December 2003 and the first quarter of 2004.
Trade union reactions
The trade unions acknowledged that Ford has to intervene in view of its major losses in Europe, but reacted with great disappointment at what they claimed was the 'deceitful attitude of the European Ford management, which breaks its promises'. The unions organised a 24-hour strike at Genk, a few 'lightning strikes' and a brief occupation of the factory gates, but these were seen as a very 'moderate' reaction, with the unions giving priority to keeping the remaining 6,000 jobs.
Gerard Ignoul, the provincial secretary of the metalworkers' trade union affiliated to the Confederation of Christian Trade Unions (Confédération des Syndicats Chrétiens/Algemeen Christelijk Vakverbond, CSC/ACV), was critical of the management’s position. Above all, he criticised the fact that there is no certainty that production of the Mondeo, to which the continued existence of the remaining 6,000 jobs is directly linked, will remain at Genk. Both the CSC/ACV union and the metalworkers' organisation of the Belgian General Federation of Labour (Fédération Générale du Travail de Belgique/Algemeen Belgisch Vakverbond, FGTB/ABVV) expressed fears that the Ford site at Genk will be closed in future.
Commentators claimed that management's communication with the employees over the situation at Genk was inadequate, fanning feelings of unrest and feeding rumours. For example, there was a report, denied emphatically by the government, that the authorities had been aware some time in advance of the job losses, as well as a suspicion - hardly based on facts - that Ford’s decision was inspired by 'revenge' for the independent attitude that Belgium (together with France and Germany) adopted in connection with the war in Iraq.
In the meantime, under pressure from the unions for written guarantees, the management of Ford Europe announced in mid-December 2003 that the Genk site will in future assemble two more models in addition to the Mondeo. It was stated at a works council meeting that production of both the successor of the Galaxy and of the Crossover (a cross between a passenger and all-terrain vehicle) will be brought to Genk. This will be accompanied by an investment of about EUR 500 million. This decision by European management should guarantee the existence of the plant in the medium term.
With regard to the 3,000 redundancies, in negotiations with management over an accompanying 'social plan', trade unions have sought preservation of the maximum number of jobs at Genk, maximum attention to re-employment, early retirement at the age of 50 and highly developed social support measures for the workers concerned. Preliminary agreement has been reached on early retirement at the age of 50, while the parties have also agreed on the establishment of a 're-employment unit' to speed up the process of finding new jobs for the redundant workers.
Renault law
In the aftermath of the closure of the Renault assembly plant at Vilvoorde in 1997, the so-called 'Renault law' was implemented. This legislation seeks to protect employees in the event of company restructuring (BE0004309F). It obliges management to conduct a consultation and negotiation procedure prior to an intended collective redundancy, during which possible alternative measures must be discussed with workers' representatives. If the employer fails to meet the obligation to follow this procedure, dismissed employees have the right to seek reinstatement or additional severance pay.
Critics claims that the latest restructuring at Ford Genk makes it clear that this legislation is a 'dead letter' and behind reality. The Ford group's major losses and global overcapacity meant that the loss of 3,000 jobs was already a fact for Ford Europe even before the Belgian management could start up the consultation procedure.
High wage costs
According to the Agoria metalworking and technological industries employers' federation, the Belgian car assembly sectors has a number of key advantages, notably:
- the closeness of the sales markets - as the transport of finished cars occurs within a maximum radius of 500 kilometres, Belgium's central location is a definite advantage;
- the training level and commitment of employees, which are well thought of; and
- the fact that labour is characterised by a great willingness to be flexible.
However, according to the employers’ organisation, this is countered by the high cost of wages. The cost of wages for workers in Belgium is amongst the highest in Europe. However, according to Pieter Donck, the automotive sector director at Agoria, the cost of wages in not the only problem - 'high energy costs, the cost of employee travel and the complex environmental legislation also play a role.'
The Federation of Belgian Enterprises (Fédération des Entreprises de Belgique/Verbond van Belgische Ondernemingen, FEB/VBO) feels that the Ford restructuring is proof that the economic situation is still vulnerable in Belgium. The FEB/VBO director-general, Pieter Timmermans, stated in the De Standaard newspaper that structural intervention is an absolute necessity. 'Policy must remove the obstacles that stand in the way of job creation and preserving jobs', said Mr Timmermans.
Commentary
The wage costs issue should be put into perspective. Wage costs make up no more than 5%-6% of the total costs of 'pure' assembly plants. Claims about the obstacle represented by wage costs are scarcely or not at all linked to the factor of productivity. The productivity of the automotive sector in Belgium, which is already high, has been rising by about 2.3% every year. Even a decrease in wage costs by a substantial 10% would represent a saving of only 0.5%-0.6% in the sector's total costs. Of course, this low percentage is a considerable sum in absolute terms but whether it justifies, from a business management point of view, the closure and restart of production at another location is another matter.
It is more than probable that other factors play a role in the dynamic that has put the Belgian automotive sector in an uncertain situation over the past few years. Overcapacity in the sector both in Europe and worldwide (in recent years, GM has decided to close 11 plants with a loss of 30,000 jobs) and the strategy of manufacturers to produce small cars for new central and eastern European markets locally (illustrated by a recent investment by Toyota in Romania) seem to be more important elements in the decision.
This also explains why no clear trends can be observed. At the same time as Ford Genk is shedding jobs, the Volvo plant at Ghent (part of Ford) is expanding and recruiting about 500 staff. Furthermore, at Volkswagen's Foret plant in Brussels, new initiatives are being taken in the area of production organisation (following the German example) due to favourable prospects in connection with the production of the Golf model.
Whatever the case, Belgium remains a car assembly country, and it is in this phase of car construction that increasing capital investments are occurring and fewer and fewer employees are thus needed to produce more and more cars. This situation of 'jobless economic growth' makes Belgium extremely vulnerable. (Jürgen Oste and Jacques Vilrokx, TESA-VUB)