Pension dispute at multinational manufacturing company

In March 2007, a dispute broke out at Liebherr Container Cranes, one of Ireland’s oldest multinational manufacturing plants, over the management’s decision to implement changes to the traditional pension scheme. The workers’ protest took the form of a ban on overtime work from 13 March onwards, as well as two one-day strikes in March, with the prospect of further industrial action ahead.

Company background

Liebherr Container Cranes was founded in 1958, coinciding with Ireland’s first policy efforts to attract multinational investors into the country. Situated in Kerry in southwest Ireland, it remains one of the country’s oldest multinational manufacturing companies. The company has provided secure employment since its foundation, with current basic pay reaching close to €40,000 a year for skilled production personnel.

Dispute over pension adjustments

As a result of changes to the traditional pension scheme at the Liebherr plant, some 400 workers affected took industrial action. The workers’ protest took the form of a ban on overtime work from 13 March onwards, as well as two one-day strikes on 13 March and 23 March, with the prospect of further industrial action ahead. Two attempts by the national conciliation body, the Labour Relations Commission (LRC), to resolve the dispute had ended in failure.

However, as the period of the strike action proved to be a busy time for the company, the overtime ban was affecting production levels significantly on an ongoing basis. Therefore, the stakes were high, especially since Liebherr is one of the largest industrial employers in the Kerry region, which has a relative shortage of other manufacturing jobs.

The action taken by the workers at Liebherr was one of a growing number of industrial disputes, arising due to the fact that employers are seeking to limit their exposure to financial risk through traditional ‘defined benefit’ (DB) pension schemes. Under DB schemes, the pension benefit is calculated as a guaranteed percentage of the worker’s final salary and the contributions to the scheme increase, if necessary, to fund this guarantee.

This issue of financial risk is due to be addressed in a major policy statement on pensions by the government, which was scheduled to be published during April 2007.

Company evaluates pension scheme

In 2003, a financial evaluation of the DB pension scheme in Liebherr revealed that a €7.4 million deficit would need to be covered if the pension commitment to workers was to be maintained into the future. The company agreed to provide the necessary cash and guarantees over the subsequent three years. This move increased the company’s pension contribution from 11.95% to 14.25% on top of workers’ wages, while the employee contribution to the scheme remained at 10.75% of wages.

Soon after, in 2004, the company decided to close its DB pension scheme to new recruits and to set up a new ‘defined contribution’ (DC) scheme for all new workers joining the company from the date of the decision. A DC scheme involves fixed contributions, but the eventual pension amount is not guaranteed and depends on investment returns over the worker’s career.

The company argued that its parent company, Liebherr AG in Germany, had only agreed at the time to provide the funding to support the DB pension scheme on the condition that new workers enter a separate DC scheme.

Trade union reaction

The main trade unions at the plant, the Services, Industrial, Professional and Technical Union (SIPTU) and the Technical, Engineering and Electrical Union (TEEU), both rejected this claim and sought to retain access to the DB pension scheme for new workers.

After lengthy discussions, in mid 2006, SIPTU brought the issue before the Labour Court. The court advised the parties to return to immediate discussions on safeguarding the workers remaining in the DB scheme and agreeing on an arrangement for workers recruited since the scheme’s closure in 2004. In early 2007, the court clarified this ruling to mean that the trade unions should negotiate the terms of the new DC scheme.

Next steps

Since then, in January 2007, another financial evaluation of the DB scheme was carried out, which showed that there was a need for a further cash injection of €4.6 million, as well as a new bank guarantee of €2.75 million. A deadline of 1 February 2007 was set by the national pensions’ regulator for the situation to be rectified, but this date has now expired.

SIPTU, the trade union taking the industrial action, had argued that the company could afford to maintain access to the DB scheme for new entrants. It had rejected calls by the company’s management to end all industrial action before talks began on the issue.

For its part, the company stated that the ban on overtime had cut its capacity by 20% during a time of unprecedented orders. The company argued that, in a market dominated by low cost Chinese manufacturers, reliability is key to attracting customers to a plant where labour represents 50% of all costs. Warning employees of possible threats to the plant’s future, management advised them ‘to reflect on the amount of manufacturing industry remaining in that part of the country’.

Commentary

Several other issues are also under discussion between the parties, including wage restructuring and sick pay improvements. However, progress on these is unlikely in the absence of a resolution of the pension issue.

Brian Sheehan, IRN Publishing