Job losses at Klonatex textiles group

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In October 2004, the Tricolan textiles plant - part of the Klonatex group - in Naoussa, Greece was closed with the loss of around 100 jobs, despite strikes and other protests in the local area. A package of measures was agreed to assist the redundant workers. Several months earlier, another Klonatex company in Naoussa, Klostiria Naoussis SA, was also threatened with closure, but the government intervened to save the jobs of its 585-strong workforce.

Klonatex is one of the largest groups of companies active in the textiles industry in Greece. It consists of 17 companies, not only in textiles but also in telecommunications and shipping, and in 1990 it was the first holding company to be listed on the Greek Stock Exchange. The group began its business activities in 1963, when H Lanaras founded Klostiria Naoussis SA. During the 1990s, Klostiria Naoussis sold off its capital, new companies were founded and mergers and acquisitions took place. The group occupies a leading place in the manufacture of thread, with a share of 35% of the domestic market and 15% of the European market.

In the period from 1999 to 2002, Klonatex was in the spotlight several times, first because of the group’s good performance on the Stock Exchange and later because, along with other companies, it was audited by the public prosecutor’s office and placed under judicial monitoring. Klonatex was one of a number of companies accused of defrauding investors by announcing increases in their share capital for the purpose of specific investments, which were however never carried out, and of violations of stock exchange law. Furthermore, the judicial investigations also targeted the subject of use of the capital derived from the Stock Exchange.

The group started to make losses, with the result that Klostiria Naoussis SA was threatened with closure and Tricolan, another subsidiary of Klonatex, has been closed down.

Jobs saved at Klostiria Naoussis

In early July 2004, Klostiria Naoussis informed its employees that it was out of raw materials and put them on compulsory summer leave until 4 August. In the meantime, the Klonatex group began negotiations with a series of banks for the settlement of debts and the granting of a new loan. Represented by the Ministers of the Economy and Employment, the government played an active part in these negotiations. The government intervened to save the jobs of the 585 employees of Klostiria Naoussis, taking into consideration the already high unemployment rate in the Naoussa area.

When their 'compulsory' summer leave ended on 4 August, the employees returned to the factory but had no work to do because there were no raw materials, and awaited the outcome of the negotiations with the banks. An agreement was finally signed with some delay on 19 August, instead of 12 August. In this agreement, the five main creditor banks decided on the extension of a five-year bonded loan, on certain conditions, in the amount of EUR 23 million, which could be rescinded every six months for the first 18 months, if the course of events was judged to be incompatible with the group’s business plan. The recipients of the loan were Klostiria Naoussis and two other group companies, Klostiria Rodopis and Fanco. A basic prerequisite for the bonded loan to be disbursed was the parallel, gradual contribution of capital by Mr Lanaras and the Klonatex group.

Fanco-Tricolan closed

Despite this positive development for saving jobs at Klostiria Naoussis, in September 2004 it was announced that Tricolan, one of Fanco’s production units, was about to close down. Tricolan employed 98 people in Naoussa. The company’s announcement stated: 'We are forced to discontinue operations at the prêt-a-porter factory in Naoussa, which, despite our persistent efforts, is no longer viable. Any postponement of the decision or alternative solution will compromise the company’s future and place other jobs at risk.' This development evoked protests not only from Tricolan employees but also more widely in Naoussa.

By decision of the Naoussa Labour Centre, two 24-hour strikes were held, and on 23 September 2004 the town’s shops closed for two hours (from 10.00 to 12.00) and public services also closed. At the same time the municipal authority in Naoussa organised a rally in solidarity with the Tricolan workers. On 4 October 2004, a further 24-hour strike was held and workers from Naoussa travelled to Athens where they protested outside the Ministry of Employment and outside the Klonatex headquarters. The Ministry of Employment intervened in the matter by organising a meeting attended by the Deputy Minister, parliamentary deputies from the Naoussa area, representatives of the trade unions and the Naoussa Labour Centre, the local prefect and the chief executive of Fanco.

However, in the case of Tricolan the government did not have a united position. Despite efforts by the Ministry of Employment and its desire to save jobs, the Minister of the Economy, George Alogoskoufis, made apparently pointed remarks about the Klonatex group (in response to a question on whether the banks show some prejudice towards the textiles industry): 'The banks aren’t prejudiced. Maybe they are against specific companies. Let me give you an example. There is a company whose name I won’t mention, that has made huge amounts on the Stock Exchange. But it came and asked for help from the state. We told them to go to the banking sector for a loan and it is not possible for an industry, when it is in trouble, to ask for direct help from the state in meeting its demands' (quoted in the Imerissia newspaper on 17 September 2004). These statements may be indicative of a change in climate vis-à-vis the Klonatex group.

Despite the negotiations, the Tricolan factory ceased operations on 6 October 2004. Directly afterward, in a meeting attended by all the parties involved - including the Ministry of Employment, the Labour Force Employment Organisation (OAED) and the employees’ trade union - it was decided to take measures in favour of the redundant workers:

• 24 former workers will be covered by the Account for Employment and Vocational Training (LAEK);

• 30 will be included in subsidised part-time work schemes.

• all redundant staff will receive an allowance of EUR 1,500;

• all redundant staff will be covered by the OAED Unemployment Fund; and

• there will be favourable adjustments of any loans workers have received from the Workers’ Housing Organisation (OEK).

In this generally negative climate, reports that local executives of Klostiria Naoussis SA had sounded out workers on voluntary redundancies were seen as a harbinger of further redundancies in Klonatex's Naoussa plants. Thus, in late October 2004 the Naoussa Labour Centre called a series of four-hour work stoppages at the firm.

Commentary

Aside from the particular circumstances of the Klonatex group, in order to understand the magnitude of the recent job losses and uncertainty and the wide-scale protests they caused, along with the interventions to save jobs, two issues should be taken into account: the particularities of the labour market in Naoussa; and the general course taken by the textiles/clothing industry since the 1990s.

The Naoussa area has been hard hit by the effects of deindustrialisation: thus since 1995, on the basis of a joint ministerial decision, it has been included in a programme dealing with 'declining industrial areas'. This programme involves 22 of the country’s prefectures and is aimed at supporting the revitalisation and development of the country’s declining areas, by reinforcing industrial infrastructures, boosting companies’ competitiveness, supporting the establishment of new enterprises and creating support structures for development. The area's estimated unemployment rate of around 35%-40% affects not only individual unemployed workers and their families but also the smooth functioning of the town as a whole (eg because of inhabitants’ reduced purchasing power). This situation also explains the collective protests of local society over the redundancies, and the demands of the municipal authorities that special attention be paid to the area - eg through special development schemes, subsidies for labour costs in manufacturing units, measures to assist and subsidise unemployed people, recognition of time spent unemployed as counting towards pensions, exploitation of the area for tourism, and the implementation of a part-time employment scheme.

The case of the Klonatex group also partially reflects the general recession besetting the textiles and clothing industry in Greece. The causes of this recession have to do with both Greece in particular and all the European countries where this industry is particularly well developed (such as the inflow of cheap raw materials, fabrics and clothing from Asian countries). Increased customs supervision of imports of textile products and stepped-up inspections by joint task forces and the Economic Crime-fighting Corps (SDOE) to combat 'parallel' trade and any illegal imports is a standing demand of the bodies involved, such as the Association of Greek Textile Manufacturers (SEVK).

In this overall negative climate, many Greek textiles companies, citing lower labour costs, have moved part or all of their activities to other Balkan countries, while those that were no longer viable have closed down. It is difficult to estimate the precise number of companies that have closed or have moved to other countries, though the problem mainly affects companies in Central Macedonia and Thrace. Apart from the large-scale redundancies, the problem also affects micro-companies that provide their services in the form of home working to larger business units. Although it is rather difficult to find really comparable data concerning employment issues in the clothing and textiles sector, over 2002-4 the number of employees in the textiles sector decreased by 5%. Major job losses have occurred in two age groups: those aged from 25 to 29 (-51,8%) and from 55-59 (-37,2%) However, employment has increased in the case of people aged from 40-44 years. Despite this general fall in employment, the number of employers and of those regarded as self-employed has increased, which demonstrates the continuing importance of micro-enterprises for the Greek economy. However, despite isolated government interventions to save jobs, the statements of the Minister of the Economy probably indicate that the climate has changed: 'We must make it clear that growth does not come about through the preservation of industries that no longer have comparative advantages and are based on low labour costs' (quoted in Imerissia on 17 September 2004. (Christina Karakioulafis, INE-GSEE/ADEDY).