Controversial workforce-reduction agreement signed at SEAT

Download article in original language : ES0601106FES.DOC

Following lengthy negotiations and workforce mobilisations, in December 2005 Spain's SEAT motor company signed an agreement with the UGT and CC.OO trade unions that aims to tackle current problems at the firm though various measures, including the redundancy of 660 workers out of a workforce of some 13,000. The signatories see the deal as a comprise to avoid greater evils. However, the agreement has proved controversial.

Since it was founded in 1950 (ES0006295F), SEAT- now part of the Volkswagen group - has been the largest Spanish industrial company, with the highest concentration of workers in one factory (in the mid-1970s it had 25,000 employees). Though no longer as important as it was for the economy and for employment in Spain, SEAT is still a major point of reference in business and labour terms because of its size and the jobs and activities that it represents. Spain is the third-largest car manufacturing country in Europe, after Germany and France, and the seventh in the world. Therefore, what happens in the 11 car manufacturing firms located in Spain is of considerable importance to the country.

Problems at SEAT have been prominent in the media since late July 2005, when the company dismissed 46 workers for disciplinary reasons (these dismissals are currently being challenged in the courts). Due to a reduction in sales in 2005 and the fact that the 30 days off for workers under a working time 'pool' scheme (bolsa de horas de trabajo) laid down in the current company collective agreement (ES0406206F) - which are meant to be made up in times of higher workload - had been used up, in August management stated its intention to reduce pay and working time by 10% for the whole 13,000-strong workforce of the group, or to reduce the workforce by 800. This proposal was rejected by the trade unions, which proposed instead early retirement for the 2,000 SEAT workers aged over 58 years, plus training courses during working time, in addition to other commercial and industrial measures. The company was not prepared to accept the cost of such early retirement, so it rejected the alternative proposal by the unions and in late September proposed the elimination of the afternoon shift on one production line, affecting 600 workers. In October, the company's figure for its surplus workforce was raised to 1,400. Three trade unions are represented on the SEAT multi-plant workers' committee (comité intercentros) (ES0309203T) - the General Workers’ Confederation (Unión General de Trabajadores, UGT), with six representatives, the Trade Union Confederation of Workers’ Commissions (Comisiones Obreras, CC.OO), with five representatives, and the General Confederation of Labour (Confederación General del Trabajo, CGT), with two representatives - and they initially opposed the company's plan in firm and united way.

The distance between the positions of the company and the unions led to a breakdown of negotiations in late October. On 4 November, the company presented formally to the labour authorities a redundancy procedure affecting 1,346 of its 12,875 workers, or 10.5% of the workforce. This marked the start of a new stage of bargaining involving the labour authorities, which under Spanish law are ultimately responsible for deciding whether to accept the redundancy procedure (ES0311108T). The three trade unions maintained a united position of opposition to the redundancies and called several mobilisations (strikes, demonstrations and mass meetings), which were supported by much of the workforce.

Finally, in December, SEAT management reached an agreement with UGT and CC.OO (ES0601102N), which was opposed by CGT. For the two signatory unions, the agreement is a 'lesser evil' compared with the risk that the Catalan regional government would accept a greater number of redundancies and the threat by SEAT management not to make investments in the future.

Nature of SEAT's problems

Negotiations between management and trade unions have hinged on whether SEAT's current problems are structural in nature, or arise from specific current circumstances. The unions consider that the current surplus workforce is a 'situational' problem, though they insist that the company must take industrial and commercial measures to deal with the new international context of the automotive industry. Motor manufacturing is one of the most internationalised industries (TN0312101S) and companies are subject to great pressure to relocate. Furthermore, the companies located in Spain, and SEAT in particular, have until very recently maintained an industrial model based on the manufacture of mid-range vehicles. It was not until 2003 that SEAT undertook a renewal, orienting production towards sports cars with greater added value. SEAT is the only company based in Spain that can design, develop and produce its own vehicles.

The management of SEAT was initially favourable to ascribing the company's difficulties to the particular current circumstances, but later claimed that the surplus workforce was structural. SEAT's sales fell by 4.5% in 2005, whereas those of the whole Volkswagen group increased by 3.2%, and that its volume of production in 2005 was 422,000 vehicles compared with its optimum capacity of 516,000.

Main points of the agreement

The main points of the agreement reached in mid-December between the company, UGT and CC.OO are as follows.

• The company will cancel up to five days of the collective 'pool' of hours that workers owe the company.

• The parties agree to increase the maximum collective 'pool' of hours laid down in the company's collective agreement from 30 to 35 days.

• The company will present no redundancy procedures in 2006.

• The employment contracts of 660 workers will be terminated. They may choose between:

  • receiving redundancy compensation of 20 days' pay per year of seniority, with a maximum of one year's pay and a minimum of EUR 12,000. Those who choose this option will have preference for re-employment by the company as new workers without seniority, but maintaining the job category and pay level that they had at the time of redundancy. If the company fails to re-employ the workers by the second half of 2007, when the workers cease to receive unemployment benefit, it must pay them the difference between the compensation they received and the compensation laid down in the second option below; or

  • receiving compensation equivalent to 45 days' pay per year of seniority, with a maximum of two years' pay and a minimum of EUR 12,000. For these workers the company has agreed to implement a scheme, through outplacement companies, that will provide them with three job offers within nine months. These offers must be stable jobs with minimum wages equivalent to 85% of the current pay of the workers and less than 25 kilometres from their homes.

• A commission comprised of representatives of the signatories will be set up to monitor and interpret the above commitments.

A complementary plan involving voluntary redundancy and unpaid leave was agreed for 296 workers, including the following commitments:

• inclusion in the company collective agreement of a clause providing for compulsory retirement at the age of 65.

• voluntary unpaid leave of two to five years with the right of re-employment under the same employment conditions and compensation of EUR 6,000 gross per worker per year of seniority;

• termination of contract of workers now aged 63, and of those now aged 62 when they reach the age of 63, with compensation of 20 days' pay per year of seniority and a maximum of one year's pay;

• termination of contract of workers aged 60 or 61 on 31 December 2005, who will receive a lifelong supplementary payment from the company so that they receive 90% of the pension that they would have obtained if they had retired at 65, up to a maximum of EUR 85,000;

• voluntary redundancy with preferential re-employment in two to five years, with the same category and pay as at the time of redundancy and EUR 12,000 in compensation for each worker; and

• definitive redundancy, with compensation of 45 days' pay per year of seniority up to a maximum of 42 months' pay or EUR 78,000.

These agreements are accompanied by an industrial plan, through which the Volkswagen group expresses its commitment to maintain SEAT as an integral brand that designs, produces and markets its own products within the group, notably sports vehicles of greater quality and added value, while maintaining a volume of employment in accordance with labour and commercial activity. The industrial plan includes the following aspects:

• EAT plans to make investments of more than EUR 3,000 million in new models, facilities and R&D in the period 2006-10;

• in the next five years, the volume of production is expected to be between 430,000 and 449,000 units per year;

• the company will seek to improve its presence in the main European markets; and

• the company agrees to maintain a workforce of 11,125 in 2006 and 11,623 in 2007, and this figure will be maintained until 2010.

Commentary

There is no doubt that the recent dispute at SEAT is the most important since 1993, when 6,000 workers were made redundant. Several signs indicate that this crisis has been overcome but not resolved. On the day when the deal with the trade unions was signed, Andreas Schleef, the chair of SEAT, declared that the agreement 'unfortunately does not absorb all the surplus personnel', a statement that naturally met with the complete rejection on the part of the trade unions. There is clear dissatisfaction with the agreement among the workers, whether or not they have been made redundant. On 23 December 2005, when the list of redundant workers was published, the workers responded in mass with a strike. The protests have continued, among other reasons because of the criteria followed by the company in drawing up this list, which includes pregnant women, trade union representatives and ex-representatives, couples who were both made redundant, workers with shorter working hours to take care of children, people over the age of 50 with many years' seniority in the company etc. Furthermore, trade union sources estimate that 3,000 workers in auxiliary industries may soon be affected by the crisis at SEAT.

This dispute raises several questions. Why, after the major mobilisations of recent months, did the trade unions not put the agreement to a vote by the workforce or by their members, in a company with a union membership level of approximately 90% of the workforce? Why did the trade unions, who have always seen the crisis of SEAT as situational, reject the agreement to reduce working hours and pay by 10% and accept the far more drastic and definitive redundancies? These are serious questions that must be considered because of the great importance of SEAT in Spain. (Ramon Alós, QUIT-UAB)