Collective agreement regulates closure of Electrolux site

After six weeks of strike action, workers at Electrolux’s AEG site in Nuremberg agreed in a ballot, on 6 March 2006, to accept a collective agreement regulating the conditions under which the plant will be closed at the end of 2007. The plant closure affects 1,700 workers. This agreement provides for severance payments, an early retirement scheme, and the temporary transfer of workers to a training agency.

On 6 March 2006, after six weeks of strike action, a ballot was held among workers at the AEG manufacturing site of Electrolux in Nuremberg. It resulted in a decision to accept a collective agreement that regulates the conditions under which the plant will be closed at the end of 2007.

The dispute had been prompted by the announcement of the Electrolux management, in December 2005, to close the manufacturing plant in Nuremberg by the end of 2007, and to move production to Poland and Italy. The Swedish-based home appliance manufacturer acquired the production site for dishwashers and washing machines in 1994 when it took over the AEG Hausgeräte AG. The December 2005 announcement formed part of the restructuring plans of Electrolux management, which in July 2005 had caused protests and demonstrations in Germany and Italy (IT0508103N; IT0601304F).

Negotiations between the works council, representatives of the German metalworkers’ union (Industriegewerkschaft Metall, IG Metall) and management failed in January 2006. This led to a strike on 20 January. As strikes are only legal in Germany for purposes that can be regulated by collective agreement, IG Metall tabled a demand for a collective agreement (Sozialtarifvertrag) to regulate the possible closure of the plant. The union aimed at raising the costs of a possible closure, in order to either force management to revise its plans or else to win better severance payments in the case of forced redundancies. However, the company made it clear that it would maintain its closure plan, which it considered to be necessary for reasons of competitiveness and market developments. At the end of February 2006, a settlement was finally reached, following the mediation of the former minister for economy for Bavaria and current member of the board of directors at Deutsche Bahn AG, Otto Wiesheu, who had been proposed by IG Metall.

Key elements of agreement

The agreement includes the following main provisions:

  • an early retirement scheme for workers who are at least 53 years of age and who have given many years of service;
  • the establishment of a training agency (Qualifizierungsgesellschaft) for employees who are not eligible for the early retirement scheme; the company will pay for the costs of this training agency;
  • severance payments for all those made redundant or being transferred to the training agency for up to 12 months;
  • a settlement for the severance payments of about 1.8 times the monthly gross wage (up to a limit of €4,500) per year of employment.

A further provision is that the new pay scheme (Entgelt-Rahmenabkommen, ERA), agreed on in the collective agreement for the metalworking industry, will not be implemented in Nuremberg. This scheme would have sought changes in the work organisation. It also means that part of the so-called ‘adjustment fund’ (Betrieblicher Anpassungsfonds) to cover the cost of the ERA will not now be passed on to employees but will remain with the company; the same applies to the ERA compensation package (ERA-Strukturkomponente). (For further details on this topic, see also the EIRO feature on modernisation of the metalworking pay framework, DE0504106F.)

The total value of the redundancy package is about €150 million. The original sum demanded by the union was €350 million, while Electrolux’s original offer was valued at about €100 million.

Part of the compromise deal is a commitment by the bargaining parties to develop a new company-level collective agreement for a number of outsourced service and logistic sites of AEG in Germany that are not affected by the closure. These collective agreements will include deviations from the sectoral collective agreements for the metal industry.

Reaction from the social partners

The European head of white goods at Electrolux, John Bygge, reported that the negotiations had been very difficult but that he was pleased with the ‘very good package’. Altogether, the company estimated the total costs of the closure at €240 million (Company press release, 28 February 2006 (in German)).

The vice-chair of IG Metall, Berthold Huber, referred to the agreement as a ‘good result under the given circumstances’ (IG Metall press release, 28 February 2006 (in German)). However, while emphasising that the strike had delivered higher severance payments, union representatives and members of the works council expressed their disappointment that they had been unsuccessful in their original objective to safeguard employment at the site.

The outcome is particularly difficult for the employees who have now been made redundant or transferred for a year to the training agency. Given the current labour market situation in the region, most of them will have considerable difficulties in finding suitable work.

Heiner Dribbusch, Institute for Economic and Social Research (WSI), Germany

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