Social plan for redundant workers agreed at Nokia plant in Bochum

At the end of April 2008, the Nokia management and works council signed a social plan for the workers of the company’s site in Bochum in western Germany which is to close by the end of June 2008. Since Nokia has announced the plant’s closure and relocation of production lines to Hungary and Romania in January, the decision has been heavily criticised by the works council, the trade unions, and local and regional authorities.

On 25 April 2008, the Nokia management and the works council finally signed a social plan for around 2,000 employees who have been adversely affected by Nokia’s decision to close its Bochum site in North Rhine-Westphalia in western Germany by the end of June 2008 (see Nokia press release). The company’s announcement of the plant’s closure and relocation of production facilities for mobile phones to Hungary and Romania on 15 January provoked a wave of protests by the workers, trade unions, and regional and local politicians (see also the outline in the [European Restructuring Monitor quarterly ‘Nokia closes its plant’ (292Kb PDF)](/search/node/emcc OR erm OR templates OR displaydoc.php?oldIndex)).

Negotiations between the management and the works council on the volume and content of the social plan began on 20 February and ended on 8 April. Meanwhile, around 300 former Nokia jobs in Bochum were saved by selling parts of the Nokia facilities to interested investors.

Content of social plan

Redundancy payments and the resources provided for the establishment of a temporary job-creation and placement organisation will amount to a total of €200 million. The closure of Nokia’s plant in Bochum is therefore one of the most expensive plant closure’s ever.

The level of the individual redundancy payment depends on the length of employment at Nokia, the worker’s age and former wage level. For example, the payment for a 42-year old worker with 13 years of job tenure is expected to amount to a total of about €83,000. The maximum amount of an individual redundancy payment is limited to €220,000. Moreover, extra payments are to be provided for workers with disabilities and children.

The job-creation and placement organisation will assist the redundant workers in their search for alternative jobs and provide for training programmes. The organisation will be closed after 12 months. Apprentices who have not yet finished their training programme can continue their apprenticeship at other sites of the company.

Reasons for the plant’s closure

In an interview published in the Frankfurter Allgemeine Zeitung on 23 January, the Chair of Nokia’s Board of Directors, Olli-Pekka Kallasvuo, justified the decision to shut down the company’s site in Bochum. Mr Kallasvuo stated that labour costs at the Bochum site were too high, particularly in view of the declining prices for mobile phones. According to Mr Kallasvuo, the level of labour costs was also deterring closely affiliated suppliers from choosing Bochum as a location so that the competitiveness of Nokia’s Bochum site had been increasingly impaired. Finally, he underlined that market conditions required a rapid response to changing customer needs, whereas the high degree of automation at the Bochum site had prevented the production lines from being quickly and flexibly set up for new types of mobile telephones_._

Reactions to Nokia’s announcement

Trade unions condemn company decision

The announcement of the plant’s closure provoked angry protests from the workers, the works council, the German Metalworkers’ Union (Industriegewerkschaft Metall, IG Metall), and local politicians. In an initial press statement (in German), the District Manager of IG Metall in North Rhine-Westphalia, Oliver Burkhard, accused the Nokia management of exhibiting pure greed, as the Bochum plant had not suffered any losses in the past years. On 22 January, about 15,000 workers and sympathisers demonstrated in Bochum, demanding that production be maintained at the Bochum site.

The closure of Nokia’s plant in Bochum, particularly without prior notice to the local or European works councils, prompted trade union officials to call for an extension of codetermination rights. In an IG Metall press release (in German) on 18 January, Chair Berthold Huber demanded that relocation decisions should require a two-thirds majority in the supervisory board of large German companies. In a joint declaration on 13 February, the European Metalworkers’ Federation (EMF) and several national metalworking unions called for a revision of the European Works Councils Directive in order to ensure that all stakeholders could be involved in relocation processes at an early stage.

Regional government claims state subsidies back

In a television interview on 16 January, the Prime Minister of North Rhine-Westphalia, Jürgen Rüttgers, condemned Nokia’s decision as incomprehensible. Moreover, in a press statement (in German) on 6 February, the Ministry of Economic Affairs in North Rhine-Westphalia announced that an investigation was to be carried out into whether the conditions under which public subsidies were granted to Nokia in 1998 and 1999 had been fulfilled. Nokia, however, rejected all demands for repayment of the subsidies, according to the company’s press release on 19 February. An official notice to repay a total of around €60 million was issued to Nokia on 11 March. Although the company let pass the deadline, talks between Nokia and the government of North Rhine-Westphalia to find a mutually acceptable solution were continuing, according to Focus-Online, the internet version of a weekly news magazine.

Oliver Stettes, Cologne Institute for Economic Research (IW Köln)