Whirlpool Europe restructuring plan envisages large-scale job losses

Printer-friendly version

Download article in original language : it0505205fIT.DOC

In April 2005, the US-based multinational Whirlpool, the world's largest manufacturer of domestic appliances, announced a restructuring plan for its plants in Italy that envisages around 1,000 redundancies by 2007. The plants concerned are located in the province of Varese. According to the company, the restructuring plan is necessary to counteract a constant fall of competitiveness in certain segments of production. The main sectoral trade unions have objected to the company’s unilateral decision and have appealed to the local and national political authorities to find alternatives to the relocation strategies increasingly being pursued in the manufacturing sector.

The 1970s saw the birth in the province of Varese of one of the companies that made the greatest contribution to Italy’s 'economic boom' of those years: the Società Industrie Refrigeranti Ignis founded by one of the leading Italian industrialists of the time, Giovanni Borghi, who, after World War II, started production of refrigerators, a domestic appliance for which a market in Italy and Europe had yet to be created. On the death of its founder, Ignis was taken over first by the Dutch-based multinational Philips, and then in 1991 by Whirlpool- a US-based company which at the end of the 20th century was the largest manufacturer and distributor of domestic appliances in the world, operating in 17 countries and marketing its products in more than 170 countries.

Whirlpool regarded the Italian operations as an important resource in which to invest, given the ample availability of high-skilled workers and a network of high-quality suppliers. It decided to keep the group’s European headquarters at Comerio and to invest further resources in the six factories in Italy - Trento, Siena, Naples and the three plants located at Cassinetta di Biandronno, which produce 60% of the group’s entire output in Italy and employ more than one-third of its total workforce (at present Whirlpool has around 6,000 employees in Italy). This corporate strategy brought further growth to the already dense network of small manufacturing firms operating in the province of Varese, which together with the three Whirlpool plants at Cassinetta di Biandronno constituted an industrial district specialised in the production of refrigerators. At present in the province of Varese, there are at least 50 small manufacturing firms - each with fewer than 20 employees - producing components solely for Whirlpool’s plants.

In the 1990s, the group’s Italian plants were an example of industrial success. Whilst employment fell by 37% in the Italian metalworking sector during the decade, employment levels at Whirlpool Europe remained constant. With the beginning of the new century, however, the situation changed.

In 2001, Whirlpool, induced mainly by a sluggish market which showed no signs of reviving, issued a restructuring plan that envisaged the redundancy of 247 workers (almost 200 of them in the province of Varese) and, on agreement with the trade unions, the temporary use of the ordinary wages guarantee fund (Cig) (IT0311306T) for workers at the refrigerator-producing factory at Cassinetta, so that output could be adjusted to a downturn in demand. The industrial plan also provided for new investment: in 2002, Whirlpool inaugurated at Cassinetta di Biandronno a new factory for the manufacture of refrigerators designed for the medium to high section of the market, and the department specialised in the production of ovens and cooking hobs was restructured. Thereafter, it became common practice by the company to resort to the Cig to deal with downturns in demand at the end of the year, and to use temporary agency workers (IT0208101N) to cope with production peaks, which usually occurred during the middle months of the year.

In the past few years, the increased costs of raw materials have created considerable problems for many of the Whirlpool group’s plants operating around the world, especially in the USA. However, Whirlpool Europe has continued to achieve positive results in terms of sales and operating profits. In 2004, for example, sales increased by 7.3% on the previous year. Moreover, increased product prices and improved productivity helped offset the higher costs of raw materials and yielded a 7.6% increase in operating profits (equal to around EUR 33 million).

Restructuring plan

Despite this largely positive European scenario, at the end of March and the beginning of April 2005, the company first announced recourse to the Cig for two weeks at the Cassinetta plant producing refrigerators, and then issued a restructuring plan that involved the dismissal of around 1,000 workers. Moreover, the company management announced that no further investments would be made in the refrigerator department, while the output volumes originally foreseen for 2005, which were anyway lower than those achieved in the previous year (960,000 units scheduled for 2005 as opposed to more than 1 million produced in 2004), could not be confirmed. According to Whirlpool Europe, 'the business plan was made necessary by constant increases in the costs of raw materials, declining consumer prices, and aggressive competition by the low labour-cost countries'. In early May, 'mobility procedures' (IT0311306T) began for 783 workers, 710 of them at the Cassinetta di Biandronno plants (567 shopfloor workers and 142 office workers) and 73 (office workers) at Comerio.

The company’s decision provoked widespread concern among workers, trade unions and the local authorities. On 3 May, the main sectoral trade unions - the Italian Federation of Metalworkers (Federazione impiegati operai metallurgici, Fiom), affiliated to the General Confederation of Italian Workers (Confederazione generale italiana del lavoro, Cgil), the Italian Metal-Mechanical Federation (Federazione italiana metalmeccanici, Fim), affiliated to the Italian Confederation of Workers’ Unions (Confederazione italiana sindacati lavoratori, Cisl), and the Union of Italian Metal-Mechanical Workers (Unione italiana lavoratori metalmeccanici, Uilm), affiliated to the Union of Italian Workers (Unione italiana del lavoro, Uil) - organised a protest demonstration in the streets of Cassinetta. Two days later, a meeting was held by trade union representatives, workers from the Cassinetta plant, and the mayors of 37 municipalities situated in the plant’s surrounding district. This was a significant demonstration of solidarity which testified to the growing worries of the local authorities that the US multinational intended to relocate all or part of production abroad, with extremely damaging social and economic effects on a local production system closely dependent on the manufacture of refrigerators.

After some days of silence by the company, on 9 May the first of a series of meetings between management and the trade union representatives was held in order to find ways to avoid the redundancies envisaged by the restructuring plan and to discover Whirlpool’s industrial strategies with regard to its Italian plants.

Reactions

The management of Whirlpool Europe emphasised that the company’s restructuring plan was necessary to offset the company’s reduced competitiveness in certain production segments. However, it confirmed its intention 'to maintain the Cassinetta plants and centres of development, and in particular to keep its international headquarters at Comerio'.

Whirlpool’s restructuring plan provoked protests and widespread concern among workers, trade unions and the local authorities. The main sectoral unions considered it a 'deliberate attempt' to undermine a local industrial relations system which, over the years, had always been marked by transparency and trust and had fostered a search for shared solutions. According to Maurizio Canepari, provincial secretary of Fiom-Cgil, 'the personnel cutbacks announced by Whirlpool would lead to the immediate loss of a further 2,000 to 3,000 jobs in subcontracted and outsourced activities. Moreover, this decision - which followed a previous request by the company to improve the competitiveness of its Italian plants by reducing a series of rights and social services acquired by the workforce through collective bargaining - raised doubts concerning the group’s real intentions. With this reduction of personnel how would it be possible to achieve the output targets already set by the business plan?'

The fear that the company’s manoeuvre was a preliminary to a more extensive relocation plan was shared by the representatives of Fim-Cisl and Uilm-Uil, who for this reason stressed that 'Whirlpool must immediately make public the industrial strategies that it intends to pursue in the next four years.'

Finally, according to the president of the Province of Varese, Marco Reguzzoni, 'the Whirlpool dispute will not be confined to the province but will become an issue to be addressed at national level'. He announced 'the convening of talks among the company, trade unions, the provincial government and the Ministry of Labour and Social Policies in order to seek an alternative to a decision that would aggravate the situation of a productive system which - with the crisis of numerous manufacturing firms in the textiles and metalworking sectors, and of the aeronautics industry - is increasingly unable to cope with ongoing changes, with the risk of severe social consequences.'

Commentary

Recent years in Italy, and in many other EU countries, have seen companies manufacturing domestic appliances undergo major processes of reorganisation and rationalisation. Ever greater competitive pressure on costs, the challenges raised by international markets, changing exchange rates among the world’s main currencies (the dollar, euro and yen), increased costs of raw materials and production factors: these are the main developments responsible for the relocation of entire production systems, or parts thereof, from the countries of Western Europe and North America to those of Eastern Europe, China, and South America.

In Italy, this process of structural change is affecting major geographical areas with dense industrialisation, and it involves numerous manufacturing companies (IT0501206F). The domestic appliances sector has seen a general shift of production with low technological content (and higher volumes) to countries where the production factors are available at lower cost. This practice is driving down employment levels in wide areas of the country.

This process of renewal raises major challenges for all the actors concerned. First, given that the decision to relocate lower-quality production seems irreversible, efforts should focus on interventions designed to keep in Italy both high-range production at smaller volumes but with high technological complexity, and activities that require the greater use of high-quality inputs like design and research. Second, ways should be found to reduce the negative impact of this process of transformation on the micro and small firms still manufacturing standard products easily produced in areas with lower unit costs. Consequently, the aggregation of firms, and investments in innovation and research, should be encouraged.

Reform of the 'social shock absorbers' (IT0205204F and IT0311306T) - the measures that cushion the effects of restructuring on employees - would probably promote more balanced structural change in the Italian production system. Such reform would give greater fluidity to the labour market by providing concrete support during spells of unemployment in the form of income support, work re-entry services and retraining. This would be a concrete response to demands for protection by workers involved in restructuring processes, and it would significantly reduce the high social costs generated by the structural changes necessary to relaunch the Italian economic system. (Diego Coletto, Fondazione Regionale Pietro Seveso)

Useful? Interesting? Tell us what you think. Hide comments

Eurofound welcomes feedback and updates on this regulation

Add new comment

Click to share this page to Facebook securely

Click to share this page to Twitter securely

Click to share this page to Google+ securely

Click to share this page to LinkedIn securely