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Agreement on restructuring of Izar shipyards

Download article in original language : ES0501203FES.DOC

In December 2004, an agreement on the restructuring of Spain's publicly-owned Izar shipyards was signed by three trade unions and the State Holding Company (SEPI), which controls the shipyards. The agreement, which aims to put an end to a major industrial conflict, separates military shipbuilding from civil shipbuilding, which is to be privatised. The 11,000-strong workforce will be cut by 4,000 through early retirement.

Spain's publicly-owned shipyards have been profoundly restructured in the last 20 years. The number of jobs fell from 40,000 in 1984 to just over 11,000 in late 2003. The sector has been unable to deal with competition from countries such as Japan, China and South Korea, and the number of orders has fallen gradually. This process affects the whole EU, which in 2000 accounted for 17% of world shipbuilding and now represents only 10%, though many shipyards in the main European countries have specialised their production in high-quality segments of the market. The Spanish shipyards have not been restructured in this way and therefore have suffered even worse from the competition. A restructuring of the sector in 2000 involved the merger of the Astilleros Españoles and Bazán companies to form Izar (ES0003274N), but this did not put an end to the financial problems: from 2000 to 2004, Izar's accumulated losses were over EUR 650 million.

The problems worsened considerably when, on 12 May 2004, the EU declared the EUR 308 million of subsidies awarded by the previous People's Party (Partido Popular, PP) government to Izar to be illegal, and demanded their return. Since then other illegal subsidies have been discovered, amounting to a total of EUR 1,200 million that Izar must return, which is impossible because its assets are less than 25% of this amount. The PP government did not address this problem, but the new Socialist Party (Partido Socialista Obrero Español, PSOE) government that came to office in April 2004 has promised to guarantee the continuity of the activity in all shipbuilding centres through dialogue with the trade unions and to negotiate the timescale for returning the subsidies with the EU authorities. A bargaining process ensued that was lengthy and complex (ES0410105F). The fear of job losses and a gradual reduction in production led to large-scale industrial action by the workforce and serious conflicts with the police (ES0403205N), which came to a halt when an agreement was reached on 16 December 2004.

The deal was signed by the State Holding Company (Sociedad Española de Participaciones Industriales, SEPI), which controls the Izar shipyards, the General Workers' Confederation (Unión General de Trabajadores, UGT), the Trade Union Confederation of Workers' Commissions (Comisiones Obreras, CC.OO) and the General Workers' Confederation of Galicia (Unión General de Trabajadores de Galicia, UGTG).

Content of the agreement

According to the agreement, the activities of all the Izar yards will be maintained but its military and civil activities will be separated. The former will continue under public control, with the creation of a new company, New Izar, which came into operation on 1 January 2005. Civil production will be privatised, though the public sector may conserve a minority shareholding. The government scaled back its privatisation plans, and the new structure is set out in the table below. It was also agreed to develop a policy of early retirement aimed at reducing the total workforce of the shipyards by 4,100 (from the current 11,077 workers to 6,977).

Future structure of Izar operations
Shipyards:
Ferrol 1,955 workers Transferred to New Izar
Fene 1,014 workers Transferred to New Izar
Gijón 406 workers Privatised
Sestao 1,172 workers Privatised
Cartagena 952 workers Transferred to New Izar
Seville 360 workers Privatised
PuertoReal 1,265 workers Transferred to New Izar
San Fernando 732 workers Transferred to New Izar
Propulsion and energy facilities
Ferrol 479 workers Transferred to New Izar
Cartagena 355 workers Transferred to New Izar
Manises 321 workers Privatised
Repair facilities
Ferrol 349 workers Transferred to New Izar
Cartagena 177 workers Transferred to New Izar
Cádiz 377 workers Transferred to New Izar
San Fernando 139 workers Transferred to New Izar

In more detail, the main points laid down in the agreement are:

  • concentration of military activity in a new public company, New Izar, which will be owned 100% by SEPI. Its viability will be ensured since this activity is not subject to EU criteria on competition and the government guarantees orders for the new company;
  • organised liquidation of Izar to meet the EU requirements;.
  • sale of the assets not transferred to New Izar - ie those those facilities devoted to civil shipbuilding - to private enterprise, which will in all cases have the majority shareholding;
  • sale of the assets of the privatised units jointly and transparently by open bidding, with the opinions of the trade unions taken into account in the process;
  • fostering commercial management in order to increase the shipyards' workload by obtaining new orders on the international market;
  • a reduction in the workforce by 4,100 through obligatory pre-retirement for all workers aged 52 or over on 31 December 2004. The process affects all of the former Izar sites and ensures that these workers will be covered financially until their effective retirement age;
  • establishment of a sectoral commission to negotiate support for, and maintain business and employment in, the auxiliary industries around the shipyards, with participation of the government and trade unions and employers' organisations; and
  • establishment of a commission to negotiate agreements between Izar, SEPI and the trade unions.

The signatories to the agreement believe that the EU will approve it, according to the chair of the SEPI, Enrique Martinez. However, a European Commission competition spokesperson, Jonathan Todd, was rather less categorical about the approval (quoted in the El País newspaper on 24 December 2004).

The agreement has not been signed by three trade unions - the Galician Union Confederation (Converxencia Intersindical Galega/Confederación Intersindical Galega, CIG), the Autonomous Collective of Workers (Colectivo Autónomo de Trabajadores, CAT) and Basque Workers' Solidarity (Eusko Langileen Alkartasuna/Sindicato de Trabajadores Vascos, ELA-STV). All of these have only minority representation in the shipyards, but the last two have major representation at the Sestao site, which is the largest of the privatised plants and one of those at which there has been most industrial action. Since the agreement, there have been some more protests at this yard, but the decision of the majority trade unions that signed the agreement has prevailed. Those unions that have not signed may do so later due to a lack of alternatives.

Commentary

The final agreement guarantees the maintenance of activity at all Izar's centres. This is undoubtedly a positive aspect, but the workforce of the former Izar will be reduced by almost 40%. The future of the sites working in the civil sector will not be clear until the details of the privatisation are established. Furthermore, suitable measures have not yet been designed to deal with the repercussions of the agreement on the auxiliary industries. Though a commission for debate on this will be set up, the auxiliary companies have already expressed their concern about the reduction in business.

The greatest cause for concern is that the government (represented by SEPI) and the trade unions have always insisted on the need to draw up an industrial plan that considers the need for technological innovation and specialisation in naval production, but this plan has not been drawn up. The reduction in employment arising from the agreement is not traumatic because those affected are offered good conditions, but without this industrial plan there seems to be no basis for putting an end to the permanent reduction in production that the sector has suffered for the last 20 years. (Andreu Lope, QUIT-UAB)

Page last updated: 11 February, 2005
About this document
  • ID: ES0501203F
  • Author: Andreu Lope
  • Country: Spain
  • Language: EN
  • Publication date: 11-02-2005