Redundancies and reorganisation at Ericsson and Siemens

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As a result of the crisis in the telecommunications sector, and particularly in mobile telephony, in late 2001 Ericsson announced the elimination of 850 jobs in Spain, while Siemens announced plans to reorganise its workforce. Both companies intend to reduce their industrial activity in Spain and to outsource administrative and technical services in order to concentrate investments in research and development.

In 2001, two major telecommunications technology multinationals operating in Spain - the Swedish-based Ericsson and German-based Siemens- announced job losses and restructuring.

Ericsson job losses

In June 2001, Ericsson Spain announced the closure of its only plant producing mobile telecommunications terminals, located at Zamudio in the Basque Country, which was set up in 1993. In September 2001, Ericsson signed a preliminary agreement with Mondragón Corporación Cooperativa (MCC) to convert the Zamudio plant into a cooperative within the Mondragón group, under the name Bilbao Technology Center (BTC). However, the trade unions and workers' committee at Zamudio did not accept the proposal, due to the alleged lack of a clear industrial and technological plan. During 2001, 90 temporary contracts at the plant were not renewed, and the company and the trade unions were negotiating 130 redundancies among the total of 350 permanent jobs. At the end of 2001, Ericsson raised the number of job losses to 850, of whom 550 will be relocated to other companies. The most heavily affected areas are operations, radio and computer support, and the job cuts will be made through pre-retirement, voluntary redundancy, relocation and dismissal.

Ericsson Spain currently has a workforce of 3,700, of whom 1,400 work in technology development. Employment increased steadily over the last decade, and at the same time there was a major rejuvenation of the workforce through the closure of the plant at Leganés, Madrid, in 1998 and the dismissal of 700 workers, as a result of which workers aged 26-35 years now make up 52% of the Ericsson Spain workforce. This staffing policy is directly related to the fact that 74% of the company's sales relate to mobile telephony, and in the past five years it has recruited an increasing number of technicians and engineers in this area.

Siemens announces reorganisation

In December 2001, the chair of the Siemens group in Spain announced a reorganisation of the firm's workforce, without stating the nature or scope of this move. This announcement was accompanied by the announcement of the trading accounts for 2001, which showed a 19.4% increase in turnover and a 32.7% increase in the workforce. Falling sales in the mobile telephony sector, which had a significant effect on the Siemens group worldwide, as on other companies in the industry, did not have the same effect on the sales of Siemens Spain: its information and communications division increased its turnover by EUR 701 million in 2001.

In Spain, the information and communications division of the Siemens group is less important in relative terms than that of Ericsson - they represent 41% and 51% of turnover respectively - due to the greater diversification of its markets. The Siemens group produces mobile telephony base stations and networks, but not terminals, so the decline in this latter market segment has not affected the company so directly. The Siemens group has 5,200 workers at factories in Madrid, Barcelona, Saragossa and Seville. However, Siemens, as with Ericsson, foresees a reduction in manufacturing in Spain and a concentration of its investments in research and development (R&D) - a tendency that has already been observed for seven years, whereby the number of less-qualified jobs has been reduced and highly-qualified staff have been recruited, thus leading to a rejuvenation of the workforce.

Worldwide context of restructuring

In 2001, Ericsson announced successive job cuts (SE0104193N) that took job losses at the end of the year to 22,000, representing 20% of its world workforce (of 107,000). Profits fell significantly in the first and second quarter of the year, and the company suffered losses of EUR 419 million in the third quarter, due to a 42% fall in mobile telephony sales. This situation led to the resignation of the chair of the company, Lars Ramquist, and his replacement by Michael Treschow. In order to curb the losses in the mobile telephony sector, in 2001 Ericsson reached an agreement to buy mobile terminals from a US-owned company based in Singapore, and later reached an agreement with Sony to merge the two companies' mobile telephone manufacturing operations through the creation of Sony Ericsson Mobile Communications.

The Siemens group has adopted 'Operation 2003', a growth plan seeking to return its telecommunications business to profit by integrating VDO Automotive and Siemens Dematic, increasing profitability in the US market, and cutting costs through measures that include eliminating 17,000 jobs and reducing the pay of 40,000 of its German employees. With this plan, Siemens aims to curb the losses that began in the second quarter of 2001 and rose to EUR 1,098 million in the third quarter. The losses and future redundancies are concentrated in mobile telephony. Siemens reached an agreement with Toshiba to produce mobile terminals, but the agreement was later ended.

Commentary

The reorganisations and redundancies announced by Ericsson and Siemens in Spain continue their policy of eliminating jobs in production and outsourcing activities. Ericsson relocated staff to subcontracted companies such as Flextronics and SCI Samina when it closed its Leganés plant in 1998, while Siemens relocated such workers to other group companies when it transferred its industrial facilities business to Controlmatic, a group subsidiary. Commercial activities and R&D are thus maintained with younger, better-qualified staff.

This tendency falls within a human resources policy aimed at replacing factory workers and administrative and technical support workers with younger, highly-qualified staff in areas such as marketing and R&D, who offer greater availability with regard to hours of work and distribution of working time, functional and geographic mobility, and individualised pay, which involves lower wage costs. This personnel policy leads to a high employee turnover.

The recent development of the personnel policy of these companies arguably reinforces a 'paternalistic' business culture which, for several reasons, is not very favourable to bargaining with trade unions. These reasons include the increasing number of employees with individualised objectives with regard to career, pay, working time etc, and the added difficulty of homogenising workforces with very heterogeneous employment and professional profiles, that have changed greatly in a very short period of time. These conditions of employment have clear repercussions on trade union membership, which is very low among the more qualified technical staff — precisely those who make up an increasing proportion of the workforce. (Manuel Sánchez, CIREM Foundation)