In summer 2003, the French-based food multinational, Danone, took the decision to close one of its plants in Poland - the LU Polska facility in Jarosław - by the end of 2004, with the loss of 460 jobs. The company has established a major 'social package' of financial and job-finding measures to accompany the redundancies, a very unusual move in Poland’s private sector.
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In summer 2003, the French-based food multinational, Danone, took the decision to close one of its plants in Poland - the LU Polska facility in Jarosław - by the end of 2004, with the loss of 460 jobs. The company has established a major 'social package' of financial and job-finding measures to accompany the redundancies, a very unusual move in Poland’s private sector.
In 2001, LU Polska, a subsidiary of the French-based food multinational, Danone, took over a production facility in Jarosław (from the UK-based United Biscuits) and proceeded to manufacture its own products there, including LU biscuits. However, in mid-2003, Danone took the decision to shut down the plant, concentrating Polish manufacturing operations in the company’s facility in Płońsk. At the time of the takeover, there was nothing to indicate that Danone would be forced to shut the plant down so soon.
Danone maintains that the decision to close the Jarosław site is dictated by falling demand for the company’s products. As Alain Locqueneux, the chair of LU Polska. put it: 'the consolidation of production results from the difficult situation prevailing in the sector. This is the only solution which will enable us to remain competitive in the market.' Mr Locqueneux also cited statistics according to which a sustained decrease in demand for pastries has left the Jarosław plant with 65% of its production capacity unused, with LU Polska’s turnover falling by 30% over the past two years. These are the only reasons, he stated, for the factory’s closure.
In July 2003, LU Polska’s board of directors decided that the Jarosław operation would be shut down by the end of 2004, with the loss of approximately 460 jobs. The company has offered to the redundant employees a 'social package', which aims to provide a comprehensive 'vocational revitalisation' plan. Thus, LU Polska has financed the establishment of a Vocational Activation Centre (Centrum Aktywizacji Zawodowej, CAZ) charged with assisting employees in finding new jobs. The Centre collects vacancy advertisements, prepares employees for job interviews, assists them in drafting their CVs and similar documents, helps those employees who decide to set up their own businesses, and arranges work placements.
Under the social package programme:
all LU Polska employees at Jarosław will be given notice of termination of contract on 1 January 2004, although effective termination will be postponed until the end of 2004. Over these 12 months, the employees will be successively exempted from the duty to work while continuing to draw their full wages. In this way, the employees being made redundant will have more time in which to look for new work;
all employees will receive a severance benefit of 10 times their monthly wage (11 times the monthly wage for employees with more than 20 years' service). In addition to this 'golden handshake', the employees will be eligible for an 'anniversary award';
employees will also be eligible for exemption from the duty to work - while retaining their pay entitlements - for a three-month period if they find a new employer with which a trial placement must be served;
as it is transferring all manufacturing operations to Płońsk, LU Polska has offered to employ 52 of the Jarosław employees to be made redundant at that location. Those workers who choose to move to Płońsk to take up this offer will receive a relocation supplement (of six times their monthly earnings), further financial assistance for their move, a housing rent subsidy, and a flat-rate refund of relocation expenses;
employees who embark on their own business activity will be eligible for financial grants, and another grant will be paid out if the employee’s business employs her or his spouse or adult child. Such employees will also receive a bonus earmarked to meet their social insurance contributions; and
LU Polska has made queries to potential employers which might be interested in taking on the employees dismissed at Jarosław. A new employer will receive a refund of social insurance contributions for nine months for employees aged over 48, and for 18 months for those aged over 50. These benefits, however, will be payable only to employers that retain the former LU Polska staff for an indefinite term. Furthermore, if workers receive from their new employer a wage lower than that last drawn at LU Polska, the latter will provide them with an 'equalisation supplement' for four, six or 18 months (depending on the employee’s age).
In late August 2003, LU Polska signed an 'agreement concerning dismissal of employees for reasons attaching to the employer' with the trade unions.
According to information furnished by LU Polska’s management, by late October 2003 the Vocational Activation Centre had received 34 offers of employment, spoken with 132 employees, held six training events on job-hunting skills and established contact with 55 companies. Meanwhile, 26 employees had expressed interest in the pre-retirement benefits offered as part of the social package. Given these figures, along with the offer of 52 jobs at Płońsk, the board of LU Polska considers the status of 112 redundant employees to be resolved, at least potentially. This would mean that 24% of the Jarosław employees already have some solution to their predicament. Citing these results, the company’s board as well as government officials have hailed the social package as a unique achievement in Poland. However, there are sceptics who are inclined to believe that there is a large gap separating the theoretical benefits of the social package from it successful implementation. Nevertheless, while it is difficult to assess the effectiveness of the package's various instruments at this point, there appears to some commentators to be a good chance that all redundant employees will find an offer to their liking.
The closure of the Jarosław factory is bound to engender strong protests in the local community; this is hardly surprising as 460 jobs are at stake in a region with an unemployment rate of 17%. Janusz Dabrawski, the mayor of Jarosław, where LU Polska is the major employer, has stated that the liquidation of the LU plant will also endanger a further 4,000 jobs among linked companies. Partly due to these considerations, some parties have proposed that an employee-owned company be set up to continue production at the plant. The board of LU Polska responded to this proposal by declaring its willingness to offer use of the SAN trademark (an established brand in Poland) on very favourable terms, and to release the factory buildings and the plant remaining after the transfer of production to Płońsk. LU Polska also offered to share in the cost of purchasing such further machinery as is needed for continuing production. It also offered to the trade union organisations the services of an industrial affairs consultant and of companies specialising in market research and in employee-owned entities. The final choice of consultants was left at the discretion of the unions, with the consultant fees to be covered in full by LU Polska.
Despite these offers, the unions adopted a sceptical approach. In late October, the chair of the Independent and Self-Governing Trade Union Solidarity (Niezależny, Samorządny Zwiazek Zawodowy Solidarność, NSZZ Solidarność) section at LU Polska's Jarosław factory responded to a query about whether the employees will be able to establish a company of their own and save their jobs thus: 'we would like to, but right now, we have a small chance of surviving'.
The local community has started a boycott of Danone products, which has received the support of the regional structure of NSZZ Solidarność.
The closure of the Jarosław plant is also being questioned by some economists. As one stated: 'How can it be that a plant which was posting many millions in profits as of its takeover and controlled 35% of the market lost ground in the space of two years to the point that nobody as much as tried to keep it afloat? This may have been a hostile takeover in that, even before the acquisition of SAN, there was a ready plan to close that facility and to move production to Płońsk or to one of the factories in the Czech Republic. The second reason is the abysmal strategy for integration; a reduction in the sales representative group and misguided marketing policy yielded a readily foreseeable drop in sales.'
Eurofound recommends citing this publication in the following way.
Eurofound (2003), 'Social package' to accompany LU Polska job losses, article.
