Restructuring in multinationals hits employment in Portugal

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April 2001 saw the latest in a series of announcements of job losses in Portugal, following the restructuring of multinational companies involving closures and relocation. The redundancies have affected sectors such as textiles and clothing (Têxteis Proteu and C&J Clark), steel (Siderurgia Nacional) electronics (Indelma) and motor manufacturing (Autoeuropa-Volkswagen). The job losses, often hitting especially women and poorer regions, have prompted much criticism and debate.

In recent months, restructuring within multinational companies employing large numbers of workers has had a significant impact in Portugal. The situation, already one of concern (PT9812114F), took a significant downturn during April 2001.

Textiles, clothing and footwear

A number of Portuguese companies in the textiles, clothing and footwear sector are subsidiaries of or subcontractors for multinational companies. Têxteis Proteu is a textiles company belonging to a French group, located in Damaia on the outskirts of Lisbon. In April 2001, the company, which employs close to 300 workers, initiated a collective redundancy procedure. Têxteis Proteu, which has worked for a number of international designer labels, has held a contact with Yves Saint-Laurent fashion house for the manufacture of menswear. However, the French label recently terminated the contract, opting for countries where labour is cheaper. Given the move, Têxteis Proteu has decided to discontinue its activities in Portugal. The company's workforce was composed entirely of women.

The Federation of Unions in the Textile, Woolens and Clothing Sector (Federação dos Sindicatos dos Texteis, Lanifícios e Vestuário) has claimed that although the large designer labels continue to pursue these and other regrettable practices, their reputations remain unscathed.

C&J Clark, the UK-based footwear manufacturer, has a number of factories in Arouca and Castelo de Paiva in the north of Portugal. At the beginning of 2001, the company announced the dismissal of 368 out of the 433 workers at Arouca and of 10 employees working at Castelo de Paiva. According to the Union of Workers in the Footwear, Handbag and Related Industries of Aveiro and Coimbra (Sindicato dos Operários da Indústria do Calçado, Malas e Afins de Aveiro e Coimbra), the company recently acquired the German-owned group Elefanten-Beudenberg, which also has companies in Portugal, in Seixezelo and Vila Nova de Gaia. The union has speculated that the Arouca dismissals may be linked to the fact that Elefanten-Beudenberg owns a company that produces uppers for shoes in India. The union also stated that:

  • the company currently has enough orders to continue production; and
  • less than a year previously, the company signed a contract with the municipality of Castelo de Paiva in which it promised to create 100 new jobs. The municipality subsequently built a new facility for one of the companies in the Clarks International group - which is precisely the plant at which the company now intends to terminate its shoe-cutting activities.

The union is demanding a political solution, involving negotiations, aimed at putting an end to the recently announced redundancies, given that the government has given subsidies to these companies to set up in Portugal. A Communist Party (Partido Comunista, PCP) Member of the European Parliament has stated that the government cannot continue to subsidise multinationals that will dismiss workers in Portugal's less developed regions. She also stated that situations such as these pose a serious threat to social cohesion. The general secretary of the General Confederation of Portuguese Workers (Confederação Geral dos Trabalhadores Portugueses, CGTP) has stressed that the government must work toward attracting investments that do not involve companies establishing themselves for a short period of time in order to take advantage of cheap labour.

According to C&J Clark, the production units in question are no longer turning a profit. The company has recently refused to pay the customary annual production bonus, since it considers that production objectives have not been met.

Protest demonstrations were staged by C&J Clark employees in February and March 2001. Meetings between company representatives and the minister of labour and solidarity have also been held, as have meetings with a number of parliamentary deputies. The situation was also taken up in March at a meeting of the C&J Clark European Works Council held in the UK. In the meantime, close to 100 workers have voluntarily terminated their contracts and received compensation.

Steel industry

Siderurgia Nacional, the Portuguese national steel company, bought by a Spanish group some years ago, was due to halt production operations in March 2001 and close its facilities for good at the end of April. After the acquisition, the enterprise was divided into four smaller companies; production is now in the process of being terminated and the subsidiary in charge of production closed. The final phase involves the dismissal of 796 workers. Since the steel industry employs highly qualified workers, some of whom were long-time employees, a number of workers have negotiated early retirement and compensation. Workers have also negotiated additional vocational training to boost prospects for future employment.

Metalworkers' trade unions have stated that, with this turn of events, the national steel company will have forfeited both its independence and its position on the national scene. It will also represent a significant loss for the economy and the demise of a company that historically has been a key factor in the development of the district in which it is located. The unions have also claimed that that the closure process, which was to involve vocational training, the setting up of new companies to assure future employment, and special incentives for workers to find new jobs, can be considered a failure. According to the union, the initiatives have never left the drawing board and workers are being left without support. According to workforce representatives, compensation has consistently been problematic because employees often end up losing their money investing in projects that have not been adequately planned or monitored when they could still be productively employed in their former workplace.

Electronic components and auto industry

Indelma, part of the German-based Siemens electronics group, manufactures wiring for the auto industry. Some 500 redundancies - mostly involving women - out of a workforce of 1,900 were announced in March 2001 at the Indelma factory in Seixal, across the river from Lisbon. The company had recently cut 600 jobs. It is deactivating a number of production lines manufacturing electrical automobile wiring for Renault. According to the unions, these areas of production are being relocated to Lithuania and Turkey. This leaves Indelma totally dependent financially on its last remaining major client, Autoeuropa-Volkswagen. The situation is expected to deteriorate because orders are sure to slow down, once the production cycles of certain manufactured products for the auto industry come to an end.

In the opinion of the Union of Electrical Industries of Lisboa Santarém and Castelo Branco (Sindicato das Indústrias Eléctricas de Lisboa, Santarém e Castelo Branco):

  • the government should suspend all support that has been given to Siemens for modernising production; and
  • Siemens should be banned from applying for the public tender to supply rolling stock for the underground railway that is planned for the south side of the Tagus river. According to the union, the company has so far kept many employees on in order to maintain its public image, and if it cannot guarantee employment levels, even with government support, it is in no moral position to tender any kind of major bid.

Workers at Indelma have staged strikes and held demonstrations over the past few months outside parliament and the Prime Minister's residence. However, 300 workers have accepted the company's proposal for voluntary contract termination.

The auto industry is also experiencing hardships in Portugal. Autoeuropa-Volkswagen announced in March 2001 that it will not be renewing the contracts of 500 employees who were hired in summer 2000 to form a new work shift in order to meet production needs for a particular car model. Even though the workers had been hired only for the summer period, they had remained hopeful that the crisis would abate and that their jobs would be guaranteed in the future. According to the press, negotiations between Autoeuropa and the Portuguese government have led the German-owned company to opt for relocating some of its operations to Belgium, among other countries. The municipal authorities of Palmela, where Autoeuropa's facilities are located, have reminded the government how dependent the district is on the multinational company. The company's subsidiaries employ close to 10,000 workers and there is a pressing need to create alternative economic activities before 2004, the date marking the end of Volkswagen's commitment with the government to remain in Portugal.

Commentary

These recent trends and changes in multinational firms operating in Portugal emphasise the intensification of the combined rationalisation/internationalisation strategies of these companies, which are more than ever based on organisational transformations - both between firms (through mergers and acquisition) and within firms. Human resource management strategies are a part of this equation. The situation will challenge trade unions, works councils and local governments to seek new forms of bargaining on issues such as the employment relationship, social security and vocational training at European, regional and enterprise level. (Maria Luisa Cristovam, UAL)

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