In October 2002, IBM announced that it was to close its Hungarian hard-disk manufacturing facility, located in Székesfehérvár, employing 3,700 people. In early November, an agreement was signed between IBM and the local trade unions and works council concerning the rules for the redundancy process.
IBM, the US-based information technology multinational, announced on 22 October 2002 that it would close its Hungarian hard-disk manufacturing facility, located in Székesfehérvár, employing 3,700 people. The plant was Hungary's sixth-largest company in terms of annual turnover and operating profit in 2001.
The reason for the plant closure is the global slowdown in the personal computer (PC) industry. The Székesfehérvár plant, which opened in 1995, and once employed more than 6,000 people, was already underutilised due to the shrinking demand for hard disks. A prelude to the closure decision was that IBM had sold its hard-disk manufacturing capacities to the Japanese-based Hitachi in June 2002. According to the company's announcement, production at Székesfehérvár is to cease on 30 November 2002 and in the first half of 2003 all its machinery will be relocated to Asia. The company announced that it would begin to make employees redundant from 1 January 2003 onwards, and that it would cooperate with local trade unions in order to develop a joint package to handle the plant closure.
At the Székesfehérvár facility, 2,100 employees are employed directly by IBM and 1,600 workers are hired through a personnel agency. About 1,000 employees live in the city of Székesfehérvár and a further 500 employees commute from neighbouring villages. The rest of employees live far away and transported to and from work by company buses. Part of the 'contingent' workforce is made up of Slovakian 'guest workers'. The majority of employees are unskilled workers. The share of employees aged over 40 is fairly high, due to the fact that IBM pursued a non-discriminatory employment policy. Furthermore, several hundred employees working for other firms servicing the plant will be also affected. The company's departure will also hit the city council hard, as it will lose about 4% of local taxes.
The local Employment Centre, in cooperation with IBM, has deployed a special office at the plant to facilitate re-employment and retraining. The city also has created a special fund to assist former IBM employees. The Ministry of Employment and Labour and the Ministry of Industry and Transportation are also involved in developing an action plan.
Székesfehérvár is a major industrial centre in western Hungary, which saw a large influx of foreign direct investors during the 1990s. The local employment office has about 2,500 registered vacancies, and a number of other multinational companies operating in the area offered IBM employees more than 3,000 jobs immediately after the announcement of the closure. Moreover, negotiations with further incoming investors have already begun. According to Videoton, the Hungarian-owned company which leased the manufacturing premises to IBM, the facility will be occupied by an investor again within half a year.
According to estimates, about half of the IBM workforce will immediately find a new job. A general problem for all IBM employees is, however, that the plant has one of the highest wage levels in the region, complemented with generous social benefit schemes. There will not be too many jobs which can match the remuneration level at IBM. The re-employment possibilities for those employees living in remote villages are difficult, and will mostly depend on the willingness of companies eager to employ them to provide commuting buses. Employees aged over 40 have also expressed fears about finding new work.
On 4 November, an agreement was signed between IBM and the local trade unions and works council concerning the rules for the redundancy process. The agreement provides that the company will give notice of termination of contract to 3,400 employees on 2 January 2003, and the remaining 300 will be dismissed on 30 June 2003. IBM has accepted that it will make severance payments not only to direct IBM employees but also to those hired through personnel agencies. Furthermore, the company will not demand back company loans given for housing and will continue to pay education costs for 2003 for those employees who have begun a training programme under the company's education support scheme. The company will pay workers their average wages for December, instead of benefit for lay-off/short-time working, and an additional severance payment of five to seven months' pay in addition to what is stipulated by the law. Nonetheless, only direct IBM employees are entitled to the additional provisions stipulated by the company's collective agreement.
Although IBM stated that the closure was related only to the slowdown in the PC industry, a public debate has emerged concerning the competitiveness of Hungary as an investment location, which has been questioned due to recent increases in wages and overvaluation of the currency. The president of one of the major employers’ organisations has demanded a reduction in the rate of tax on company profits from 18% to 12%, in order to maintain the competitiveness of the country. Trade unions have criticised IBM for leaving the country immediately after the expiry of 'tax holiday' schemes granted for investors in Hungary. The company has also been criticised for announcing the closure with only six weeks' notice. In a joint declaration, the national trade union confederations expressed their opinion that IBM has an ethical duty to repay the various investment funding received from Hungary, in order to assist employees awaiting redundancy.