Nordsten employees receive pay increases until plant closure

Under a local agreement reached in spring 2001, employees at P Nordsten A/S, a Danish agricultural machinery manufacturer, will receive a substantial pay increase over the next two years, whereafter the plant will close and production will be transferred to Poland. This local agrement is very unusual, but at the same time an example of another ad hoc solution to company restructuring in Denmark.

At a staff meeting in January 2001, the management of the P Nordsten A/S plant at Skive, Jutland announced that the firm's owner, Kongskilde Industries, would be closing the factory and moving production of agricultural machinery to Poland on 31 March 2003. Management offered the employees a wage compensation scheme in the two-year period up until their redundancy, with a view to ensuring an orderly closure process. This wage compensation was also intended automatically to suspend the annual pay bargaining rounds at the company. At the end of February, the director of P Nordsten A/S and three employee representatives signed a local wage agreement introducing the compensation scheme for two years, whereafter the local agreement will expire without further notice. During this two-year period, all employees are free to seek new jobs.

Each month from February 2001 until March 2003, the hourly wage will be increased by DKK 1.25, producing an hourly wage increase of DKK 32.50 after 26 months. The total value of the wage supplement will amount to DKK 62,500 for each of the 41 hourly-paid members of the National Union of Metalworkers (Dansk Metalarbejderforbund, Dansk Metal) and the General Workers' Union (Specialarbejderforbundet i Danmark, SID) at Skive.

In spite of the favourable wage agreement - which will not have a major impact on the finances of Kongskilde Industries, a multinational group with companies spread over most of Europe and in the USA and Canada- the employees are resentful about the decision to relocate production. The workers, who have an average of 17 years' service with P Nordsten A/S, fail to understand why a well-functioning enterprise like the Skive plant is to be closed down - rather than, for instance, a much less well-performing operation located in Germany. The workers claim that the most important reason for the closure of Skive is that, compared with Germany, the amount of compensation in connection with closures and job cuts is much lower in Denmark.

It is unusual that company restructuring in Denmark should result in an greement giving two years' notice of redundancy combined with substantial pay increases. However, commentators state that this does not change the overall picture in relation to radical changes within companies. It is management that decides, as in the Nordsten case, to transfer production, and this decision need not be changed though negotiations with the employees or public authorities. While Denmark has introduced legislation to implement the EU Directives on transfers of undertakings (consolidated in98/59/EC) and collective redundancies (77/187/EEC, revised by 98/50/EC), this does not change the basic situation. The local agreement concluded at Nordsten is a good example of the ad hoc solutions which characterise the closure of enterprises in Denmark. In the final analysis, according to commentators, restructuring is about the interaction between the supremacy of the employer's prerogative, the degree of employee influence in connection with structural changes in enterprises, and the existence or absence of collective agreements dealing with this issue.