The economic crisis hit Hungary’s motor industry hard, but in 2010 the sector began to recover. Most car manufacturers and suppliers have announced that they are expanding and taking on workers. In addition, Daimler-Mercedes has decided to open a plant in Hungary, which is likely to benefit suppliers in the sector. The trade unions have mixed experiences with the management of multinational car firms. Some have extremely good relations with such firms, while others are not allowed on company premises.
Background
The Hungarian automotive sector benefits from the country’s geopolitical position in the centre of the EU, a large number of well qualified employees and longstanding industrial traditions. One important competitive advantage is the lower level of wages than in Western Europe, where wages are five or six times higher, combined with the highest productivity rates in the central/eastern European region. The automotive sector comprises about 630 companies and contributes €15.9 billion (19.4%) to Hungary’s total industrial output. Since the motor companies manufacture mainly for export, this accounts for 20% of total exports.
Investors have recognised the opportunities offered by the generous promotion programmes aimed at attracting investment (such as subsidies, tax holidays, customs-free zones), which can also be found in Slovakia, Poland and the Czech Republic.
Impact of the crisis on the sector
The automotive sector was one of the manufacturing sectors hardest hit by the global financial and economic crisis, as Hungary is embedded to a great extent in the international value chains of the sector. Hungarian companies initiated various crisis management schemes (cost reduction programmes, redundancies, selling non-strategic companies) to combat the effects of the crisis. These were not the only challenges faced by the sector. Declining orders, a credit crunch, bankruptcy among local suppliers (or buyers) and liquidity problems among buyers hit Hungarian automotive suppliers hard. The Hungarian vehicle industry, employing around 100,000 people, faced a 30%–40% fall in sales in 2009. Figures from the Central Statistical Office (KSH) show that 25,000 employees lost their jobs in the sector between October 2008 and August 2009 as a consequence of the crisis.
Recent expansion in the automotive industry
At the end of 2010, many of the global players announced that they were boosting their capacity in Hungary. By 2013, Audi will invest €900 million to expand capacity at its plant in Győr (NUTS (Nomenclature of Territorial Units for Statistics) code HU221). Audi is planning to raise its annual car sales by 50% to 1.5 million by 2015, which will require more capacity, according to the company’s Chair Rupert Stadler. The investment will create 1,800 jobs and could add 2% to Hungary’s gross domestic product (GDP) when completed. Audi will increase employment to 15,000 jobs, both at the plant and with suppliers, when the expansion is completed.
Opel, owned by General Motors, will spend €500 million on expanding its engine plant in Szentgotthárd (HU222). The expansion will create 800 jobs in the short term and another 200 later. The expanded plant will begin production by November 2012 and will reach full capacity in 2015. It will raise the plant’s output to 500,000 engines a year from the current figure of 460,000. The project will double Opel’s total investment in Hungary, as well as creating 2,500–3,000 jobs at Opel suppliers.
Not only have the long-established companies announced expansion plans, but new players have also appeared. In June 2008, Daimler AG decided to build a new factory in Kecskemét (HU331). The new facility is expected to involve an investment of €800 million and create 2,500 jobs directly. It will indirectly create about 10,000 more jobs with suppliers. The investments are part of Daimler’s increased emphasis on smaller ‘compact cars’, including two new models.
The Korean firm Hankook Tire Co. Ltd, currently the seventh largest and one of the fastest-growing tyre companies in the world, announced that the new unit of the Hankook Tire Rácalmás (HU211) plant had begun operation in November 2010. According to the plans, the new 58,000 square metre unit will be able to produce between 16,000 and 17,000 tyres a day, taking daily production at the plant to nearly 35,000 units. In line with the dynamic growth of the company, Hankook Tire Hungary will have hired 700 new employees by the end of 2011. Investments have been made to build up the required base of skilled workers through the offer of a government-accredited tyre manufacturing training course. The German company ZF Hungary is investing €74 million in Eger (HU312) to build its second manufacturing plant in Hungary. In a 15,000 square metre premises with 1,400 employees, ZF will manufacture 1.2 million steering gears, 1.7 million pumps and 120,000 gearboxes per year.
The Japanese company Bridgestone has brought its cutting-edge BIRD production system from Japan to Hungary. It is establishing a €195 million production facility in Tatabánya (HU212) with a daily capacity of 8,000 tyres that will employ 185 new workers.
Opinions of the trade unions
The unions hold varying opinions about the behaviour of the multinational car makers and their suppliers.
Balázs Kovács, President of Mercedes-Benz Manufacturing Hungary Kft. Works Council, said that the relationship between Mercedes and the unions is extremely positive and that his union (Mercedes-Benz Manufacturing Hungary Metalworkers’ Union) receives all necessary assistance. He added that the director of the factory has talked several times about the need for unions as well as the importance of good industrial relations. According to the union, the factory management is willing to conclude a collective agreement. Frank Kelin, Chief Executive Officer (CEO) of the Hungarian plant, has observed that anyone who works against a union is working against their own people and at the end will fail.
Attila Hegyi, an official of the Trade Union Association of Audi Hungary, said that industrial relations with Audi have been good from the beginning. The union has 3,600 members at Audi, and due to the size and manpower of the company, information and consultation is ongoing and constructive. Thomas Faustmann, CEO of Audi Motor Hungary, said the factory has invested more than €4 billion since 1993 and its turnover reached almost €5 billion in 2010. The company has found Hungarian employees to be extremely good.
Union officials working with other companies have a contrasting view of their employers.
The Suzuki car assembly plant in Esztergom (HU212) attracted considerable media attention at the beginning of 2006 when the establishment of a trade union (a branch of the LIGA Iron and Steel Association) as a result of an industrial dispute led to an extremely hostile reaction from the employer. The management forbade workers to form a union inside the factory, so the trade union’s inaugural meeting had to be held in a rented bus in the car park. Trade union members remained anonymous for fear of retaliation. The trade union president, who made his name public, was later dismissed from his job.
The Korean firm Hankook Tire, which has operated in Hungary since 2007, has been fined by various authorities for obstructing union activities. The latest case occurred at the end of 2010 when the Hungarian Labour Inspectorate levied a fine against the company for obstructing the duties and activities of the Federation of Chemical, Energy and General Workers’ Unions (VDSZ) at its new tyre factory in Dunaújváros (HU1009011I).
Tibor Bányai, HR Director of Hankook, said the company is satisfied with the quality of the Hungarian labour market as well as the level of education of the workers. He added that his company believed that industrial relations are extremely important and it supports the operation of trade unions.
Commentary
Large multinational firms play a very significant role in Hungary’s economy, accounting for the overwhelming proportion of the country’s GDP (60%), exports (65%) and research & development activity. Hungary has successfully mastered the economic transition, benefiting from its geographic location and attracting an important share of foreign direct investment in central and eastern Europe. The economy is mature, and the legal system follows European standards, providing strong protection for investors. Labour relations differ greatly from company to company. Most of the companies in the sector, employing more than 80,000 workers, do not have a regular social dialogue at all, and in some cases employers strongly oppose social dialogue, while some of them have very developed social partnerships.
Máté Komiljovics, Solution4.org