Dispute over wage cuts and privatisation at Dunaferr steel mill

In November 2002, the Hungarian government announced plans for the privatisation of the Dunaferr steel mill, the country's largest remaining state-owned manufacturing firm. At the same time, Dunaferr management proposed severe wage cuts for the coming year. Trade unions at the company object to both plans and have threatened a strike.

As a part of its proposal for the 2003 state budget, the coalition government of the Hungarian Socialist Party (Magyar Szocialista Párt, MSZP) and the liberal Alliance of Free Democrats (Szabad Demokraták Szövetsége, SZDSZ) has announced far-reaching privatisation plans, and for this purpose drafted an amendment to the law on privatisation. Since the vast majority of the firms in manufacturing, construction and commerce had already been privatised under the previous socialist-liberal government between 1994 and 1998, the new wave of company sales mainly affects firms in agriculture, finance and transportation. The only exception in manufacturing is Dunaferr, the only remaining Hungarian steel mill, which survived the transformation recession of the early 1990s, and is still one of the largest employers in Hungary. Although in the early 1990s this state enterprise was decentralised into several limited liability companies, and some smaller units were sold to foreign investors, the state is still the majority owner.

The Dunaferr group is located in Dunaújváros, a typical socialist 'company town', which was constructed in the 1950s around the greenfield steel mill. Dunaferr once employed 13,000 workers and still employs a total of 9,000 people. In recent years, the company has reported considerable losses. The troubles surfaced after the previous government, in a heavily debated move, dismissed the chief executive of the company, who was arguably was the major architect of the firm's survival during the 1990s. The new management, appointed by the current government in June 2002, put forward a comprehensive plan including organisational changes within the group, such as sales of assets, merger of formerly decentralised business units and rationalisation of production.

In November 2002, the new chief executive informed trade unions about plans to reduce the workforce. Organisational changes would result in 800 redundancies in 2003. As the plan for financial recovery also aims to cut the wage bill, the management proposed phasing out the 13th and 14th month wage payments and incentive premia, while the company’s social fund would be curtailed. These elements of wage costs are laid down in the Dunaferr group-level collective agreement. According to estimates by unions, the proposed cuts would diminish the average income of the company's workforce by 15%. Contrary to the plans of the management, unions demand an average 7% pay increase for 2003, which means a 2% rise in net wages, plus the 5% inflation rate.

The government’s plans to privatise Dunaferr came as a surprise, as during an election campaign rally held in February in Dunaújváros. Péter Medgyessy, the MSZP candidate for Prime Minister, promised that Dunaferr would not be privatised if the party won the election.

At an assembly of union members held on 20 November, workers called the management plan 'humiliating', and also protested against selling off the state’s share in the Dunaferr group. At the assembly, the management as well as the present and previous governments were blamed for the current financial crisis of the state-owned steel mill, and the rationale behind the planned privatisation was questioned. The assembly passed a resolution which authorised the unions to call a strike if no compromise could be reached with the management.

Should a strike occur at Dunaferr, it would be the first time that the employees of a major manufacturing firm have gone on strike in the modern history of Hungary. In any event, the strike call is a politically sensitive blow for the government, as Dunaújváros has always been a stronghold for MSZP and unions were its major allies in the 2002 election campaign. Ironically, a socialist-led government is again embarking on a privatisation campaign, just as it happened in 1994-5. Unsurprisingly, the new privatisation policy was heavily attacked by the Alliance of Young Democrates-Hungarian Civic Party (Fiatal Demokraták Szövetsége, FIDESZ-MPP), the major opposition party. It disagrees with the new privatisation bill, and labelled the government privatisation policy as a 'total clearance sale'.

At the November 2002 congress (HU0212101N) of the National Association of Hungarian Trade Unions (Magyar Szakszervezetek Országos Szövetsége, MSZOSZ), the Dunaferr representative of the Iron Workers’ Union put forward the union's demands in the presence of Peter Meggyesy, the Prime Minister. In his response, the Prime Minister stressed that due to the worldwide crisis of the steel industry the government must introduce severe rationalisation measures. However, he promised that the government would make a 'responsible decision' in December 2002, which would assure the re-employment of those redundant workers 'who are able to adapt to the changes.' Presumably, these promises will be converted soon into state subsidies in order to create new employment possibilities in the affected area.

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