SEAT moves 10% of Ibiza production to Slovakia
Published: 24 October 2002
In September 2002, Volkswagen announced that it is to transfer 10% of the production of the Ibiza model from the SEAT plant in Martorell, Spain to Bratislava, Slovakia. It had earlier shifted Polo production to Slovakia. The company stated that the latest move was due to failure to reach agreement on increased working time flexibility with the Martorell workers' committee, though commentators also point to the attractions of Slovakia's low pay and qualified workforce. The trade unions represented on the workers' committee were divided over the strategy to adopt over management's flexibility demands.
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In September 2002, Volkswagen announced that it is to transfer 10% of the production of the Ibiza model from the SEAT plant in Martorell, Spain to Bratislava, Slovakia. It had earlier shifted Polo production to Slovakia. The company stated that the latest move was due to failure to reach agreement on increased working time flexibility with the Martorell workers' committee, though commentators also point to the attractions of Slovakia's low pay and qualified workforce. The trade unions represented on the workers' committee were divided over the strategy to adopt over management's flexibility demands.
In late September 2002, the management of Volkswagen (VW), the German-based motor manufacturing multinational which owns SEAT in Spain, decided to move 10% of the production of the Ibiza model from the SEAT plant at Martorell in Catalonia, Spain to the group's plant in Bratislava, Slovakia, which already manufactures the chassis for the Ibiza.
The company stated that the reason for the transfer of production was a failure to reach an agreement with the Martorell workers' committee to increase the flexibility of working time. The company wanted employees to work five days more in October 2002 and nine days more in total over the rest of the year. This was necessary to meet the demand for the Ibiza and to compensate for the loss of market of other models, such as the VW Polo, which is manufactured at Bratislava and Landaben (in Navarre, Spain). Volkswagen began to manufacture some units of the Passat model at the Skoda plant in Bratislava in 1993. In 1994, it started to manufacture 1,000 units of the Golf per year at Bratislava, and by 1998 this had increased to 125,000 units. In 2000, annual production of 60,000 units of the Polo was moved from Landaben to Bratislava. However, this did not arouse controversy in Spain in the same way as the latest move of Ibiza production has. The current controversy seems to be a consequence of the perception of SEAT as a traditional Spanish brand.
Up until now, 950 units of the Ibiza model per day have been manufactured at Martorell, which employs 14,500 workers. For technical reasons, this volume of production varies to as high as 1,025 units per day. The transfer of 10% of this production from 2003 will reduce daily production to 855 vehicles and limit the possibilities of producing more of the same model at Martorell. Each year the Martorell plant produces 200,000 vehicles, 20,000 of which will now be manufactured in Bratislava. This transfer of production is not temporary, and during the remaining seven or eight years of life of the Ibiza model it will be manufactured at both plants. According to VW management, if demand falls it will be the Martorell plant that reduces production.
Effects on employment
The partial transfer of production from Martorell to Bratislava will affect the collectively agreed process that is currently renewing the workforce of SEAT: every month over 200 older workers are retiring early, on the basis of a 2001 agreement between the company and the workers' committee (ES0112213N), and being replaced by 300 young recruits per month .
The transfer to Bratislava threatens 500 direct jobs at SEAT and 5,000 indirect jobs in supplier companies. The management of the French-based Valeo group, whose Spanish subsidiary produces cabling exclusively for SEAT, has already expressed its concern about the decision. Of its 700 employees, 90 have been recruited to produce the cabling for SEAT's new Ibiza and Córdoba models. The workers' committee at Valeo fears that this company will also move part of its production to central Europe, in this case the Czech Republic. Indeed, fear of possible relocations to the east by other companies in the motor manufacturing sector and their auxiliary firms is beginning to be a concern for the social partners in Catalonia, where the sector employs 100,000 people.
Trade union criticisms
The trade unions consider that Martorell's loss of exclusive manufacture of the SEAT Ibiza is a serious development. They feel that the decision to transfer production had been taken before the disagreement over working time flexibility, because the Bratislava plant had experienced a fall in demand for the VW Polo. The unions claims that the other reasons for the transfer of production are the low pay (as low as 20% of Spanish rates) in central and eastern European countries which have applied for EU membership, and the relatively high level of training and qualification of workers in these countries. The table below gives average monthly pay rates in a number of EU and candidate countries, as compiled by the Litexco investment group, quoted in the La Vanguardia newspaper on 1 September 2002.
| . | Industry | Construction | Hotels and catering | Finance | Minimum wage |
| Bulgaria | 132 | 101 | 82 | 251 | 52 |
| Cyprus | 1,200 | 1,500 | 1,100 | 2,100 | 483 |
| Czech Republic | 494 | 516 | 400 | 959 | 194 |
| Estonia | 399 | 334 | 241 | 783 | 102 |
| Hungary | 415 | 318 | 271 | 860 | 180 |
| Latvia | 284 | 255 | 176 | 638 | 101 |
| Lithuania | 339 | 297 | 276 | 658 | 123 |
| Malta | 856 | 882 | 840 | 1,162 | 440 |
| Poland | 523 | 492 | 402 | 581 | 186 |
| Romania | 165 | 133 | 109 | 580 | 43 |
| Slovakia | 301 | 249 | 213 | 550 | 111 |
| Slovenia | 883 | 705 | 666 | 1,234 | 408 |
| Belgium | 2,490 | 2,202 | 1,930 | 3,218 | 1,163 |
| France | 1,905 | 1,430 | 1,390 | 2,950 | 1,126 |
| Germany | 3,241 | 2,800 | 1,860 | 3,860 | None |
| Italy | 2,500 | 2,200 | 1,990 | 3,700 | None |
| Spain | 1,510 | 1,131 | 901 | 2,120 | 516 |
| UK | 2,368 | 2,300 | 1,550 | 2,953 | 1,124 |
Source: Litexco group.
Furthermore, SEAT has the possibility of receiving tax concessions of up to 30% of its investment in Slovakia. This may have been another major reason for the partial transfer of production of the Ibiza. These tax concessions are being negotiated for the motor manufacturing industry by the EU and the Slovak government. A provisional document from the European Commission is in favour of a tax exemption of up to 30% for investments in this sector. Slovakia has an average income of less than 75% of that of the EU.
Division within workers' committee
The workers' committee at SEAT Martorell failed to achieve a unanimous position for bargaining with the company over the latter's working time flexibility demands. Negotiations over more work on Saturdays and public holidays were rejected by the representatives of the Trade Union Confederation of Workers’ Commissions (Comisiones Obreras, CC.OO), which considers that there is already sufficient flexibility in working time. The plant currently works 39 Saturday mornings per year, so each shift has to work 13 Saturdays. The workers on the 'special shift' in the body section do three shifts on Saturdays.
The General Workers’ Confederation (Unión General de Trabajadores, UGT), on the other hand, accepted working on five public holidays in October to avoid the transfer of production. This union would have agreed to modify the working calendar in exchange for: financial compensation; continuing with the agreed scheme whereby employees may retire early and be replaced by new young recruits; and no redundancies in 2003. The third trade union represented on the committee, the General Confederation of Labour (Confederación General del Trabajo, CGT), was opposed to the management proposals. A possible solution to the problem was that working extra days would be voluntary, but a survey of the workforce conducted by management found that only 25% of the workforce wished to work on public holidays.
The disagreements between the trade unions are also due to the forthcoming 'trade union elections' of workers' representatives at SEAT, as has happened in recent years in disputes at the Ford plant at Almussafes (ES9811288F and ES0111211F). Electoral competition between the unions is an obstacle to establishing a unanimous position on the workers' committee.
Attempts at mediation
The regional government of Catalonia and the Minister of Industry in the Spanish government have had contacts with the trade unions and SEAT management in an attempt to avoid the partial transfer of production to Bratislava. However, the authorities' intervention to attempt to convince SEAT not to switch production was in vain. The authorities did, though, obtain a commitment from the company to manufacture 300 more units more of another model, the SEAT Córdoba, at Martorell.
The authorities claim that both the central government and the Catalan regional government (Generalitat) gave substantial aid to SEAT to overcome a financial crisis in 1993. Then the company received EUR 276 million to meet the cost of redundancies caused by the closure of its old factory in Zona Franca (Barcelona). Two years later, in 1995, the European Commission agreed to accept this substantial subsidy if Volkswagen totally fulfilled its investment plan of EUR 2,650 million, which ensured the profitability of SEAT, and a full restructuring, which included new products, a workforce adjustment and closure of obsolete facilities.
Volkswagen took over SEAT in 1986 by becoming the majority shareholder. The German group invested EUR 481 million in the purchase of SEAT from its then owner, the state-owned National Institute of Industry (Instituto Nacional de Indústria, INI). Before the operation was completed, the INI accepted all the liabilities of SEAT, amounting to EUR 1,300 million. In other words, SEAT transferred its debt to the Spanish public sector. Meanwhile, Volkswagen obtained a company with healthy assets and no debts. In 1991, VW started an investment plan for the new plant in Martorell. However, the EUR 1,500 million invested through bank loans ended up causing major problems for SEAT. The financial cost of this debt failed to cover the risk of devaluation of the peseta in this period. In 1992, SEAT recorded losses of EUR 901 million, which led it to ask the government for financial aid in 1993. Now, the authorities are reminding management that there are public funds invested in SEAT, and therefore calling for the company to show social responsibility.
Market trends
Car sales, one of the best indicators of consumption, have been falling in Spain since February 2002. The economic situation and a loss of confidence among consumers are the reasons for this drop in sales, contrasting with the high growth from 1998 to 2001. In the first nine months of 2002, some 8.4% fewer vehicles were registered than in the same period of 2001. So far in 2002, almost all the major manufacturers have recorded falls in sales, with the exception of Ford, which experienced an increase up until September. SEAT has suffered the greatest fall in sales (-14.4%), followed by Volkswagen (-14.3%), Opel (-13.7), Renault (-11.6%), Peugeot (-6.3%) and Citröen (-5.7%). According to a National Association of Manufacturers of Automobiles and Lorries (Asociación Nacional de Fabricantes de Automóviles y Camiones, ANFAC) report, car sales will continue to fall over the next few months.
The possible widespread transfer of car production to central and eastern European countries, due to lower labour costs and incentives (as feared by the social partners and the regional and national authorities) does not seem a very obvious threat. According to ANFAC, the Spanish plants of Renault (Valladolid), General Motors (Saragossa) and Ford (Valencia) are among the 10 most productive in Europe, as measured by World Market Research. Another possible indicator of permanence of production in Spain is the widespread introduction of a third shift at the plants of all manufacturers. However, one of the problems for the competitiveness of motor manufacturing plants in Spain is the distance from many of the foreign markets to which over 80% of production is directed, which adds an extra EUR 300 on average to every car produced in Spain.
Commentary
The decision to transfer part of the Martorell plant's production may have been taken before the bargaining with the workers' committee over working time. In 2000, Volkswagen had already transferred part of the production of the Polo model from Landaben to Bratislava. The company's demand for greater flexibility in working time has been practically accepted by the trade unions as a fait accompli: there is already very considerable flexibility at the Martorell plant because it has been working 39 Saturdays per year for some time. Therefore, the argument of Volkswagen is in fact symbolic: it wants to make the workers' committee and the trade unions recognise the unavoidable nature of flexible working time. The symbolic precedent for this approach appeared in 1993 and later in 1995 and 1997, when Volkswagen in Germany reached an groundbreaking agreement that reduced working time, introduced greater flexibility and reduced pay. This was achieved by exchanging flexibility for employment stability. This agreement had a domino effect on motor manufacturing firms in Europe.
Today, the SEAT workers' committee and trade unions are faced with the dilemma of 'insiders and outsiders'. Rejecting flexible working time may lead to the transfer of production to other plants of the multinational, and therefore cause job losses. The capacity of resistance of the unions may help them to maintain certain employment conditions for a time, but in this case the unions are defending the interests of those in employment, the 'insiders', whereas they are neglecting the 'outsiders'. Accepting the proposal for more flexible working time (at the cost of giving up historic and symbolic achievements of the 1970s, such as not working on Saturdays) might temporarily help to maintain employment in the company and its subcontractor firms, thus combining the interests of insiders and outsiders. However, it also leads to greater instability in employment conditions, with a 'domino effect' on other companies. The task of the trade unions and the employer's representatives is by no means easy. (Antonio Martín Artiles, QUIT-UAB Group)
Eurofound recommends citing this publication in the following way.
Eurofound (2002), SEAT moves 10% of Ibiza production to Slovakia, article.
