Ongoing dispute at fertiliser production plant

In early February 2007, trade union representatives active at the Zakłady Chemiczne Police chemical fertiliser plant in Poland announced that they would resort to strike action if their pay demands were not met by 13 February 2007. Subsequently, the strike was postponed and further talks began on 19 February. The unions have been negotiating with the plant’s management since 15 January, but to date no resolution has yet been achieved.

Background

Zakłady Chemiczne Police is one of Poland’s largest producers of multi-ingredient mineral fertilisers. Since mid 2005, the company’s shares have been listed on the Warsaw Stock Exchange (Giełda Papierów Wartościowych w Warszawie SA). The current shareholding structure is as follows: the Ministry of the State Treasury (Ministerstwo Skarbu Państwa, MSP) holds a 69% stake in Police, while the employees hold 11% of the shares. The remaining shares are held by an assortment of other investors, none of which has more than a 5% stake in the company. The plant at Police currently employs some 2,800 workers.

Financial difficulties at Police plant

Following a number of unfavourable events in 2006, Zakłady Chemiczne Police is now facing a financial crisis. Firstly, the harsh winter months at the beginning of 2006 and the low temperatures that prevailed for a relatively long period of time resulted in a drop in gas supplies, which, in turn, forced the Police plant to scale back its production. Secondly, the hot weather conditions during the subsequent summer months delayed the start of work on farms, making the demand for fertilisers lower than in previous years. Moreover, a significant drop in ammonia prices occurred in the world markets in 2006, which affected the Police plant as it used to generate good profits on ammonia fertilisers. While Police’s complete financial results for 2006 were not available in early February 2007, it appears that all of these factors together will cause the plant to record a loss, in contrast with its profit of PLN 56 million (about €14.5 million as at 29 March 2007) recorded for 2005.

Cost-cutting measures

Faced with a deteriorating financial situation, management at Zakłady Chemiczne Police decided to suspend bonus payments to employees in the autumn of 2006; the bonuses constituted an integral part of workers’ pay package, corresponding to about 6% of a typical employee’s monthly takings. The employees also suffered a loss in their capacity as shareholders, as the company’s shares lost some of their market value.

Management at the Police chemical plant has also announced that, given the continuing financial problems, the workforce should not expect to receive a pay rise in 2007. Thus, the management has retracted its earlier promise of pay increases, designed to prevent qualified workers from leaving the company to work abroad – an increasingly frequent occurrence in Poland.

Trade union demands

Workforce representatives and the company’s management first entered into pay negotiations on 15 January 2007; however, the participants failed to reach a resolution in the ensuing weeks. The trade unions proceeded to formulate their demands in a letter in which they announced the start of a collective dispute, presenting it to the management on 7 February 2007. The main demands included a 3.5% wage increase to make up for 2006, along with an additional 10% increase in 2007. Moreover, the trade unions backed their demands with the threat of strike action, if the management failed to agree to their requests by the deadline date of 13 February. However, in light of the General Meeting of Shareholders scheduled for 14 February, the unions agreed to delay any strike action and to enter another round of talks on 19 February.

Commentary

Economic problems are not the only difficulties plaguing the Police chemical plant at present. The fact that it is largely owned by the Polish government leaves it open to political influence, which translates into frequent rotations in its management; over the past five years, for example, the Police plant has had six presidents. This is hardly helpful in terms of drawing up and implementing a sustainable restructuring programme; nevertheless, it is anticipated that whatever programme is eventually adopted, it will most likely involve redundancies. Either way, the coming weeks should bring to the fore strategic decisions concerning the company’s future.

Piotr Sula, Institute of Public Affairs

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