General Electric employees protest at planned relocation

General Electric is planning to cease production of certain types of lamps at its Vác and Kisvárda manufacturing plants due to increased production costs. The Independent Trade Union of Tungsram Workers stated that about 600–700 employees might lose their jobs in 2008 as a result of the company’s plans to relocate production to China. In protest, the union held a demonstration in front of the company’s headquarters in Budapest and staged a 30-minute warning strike at the Vác plant.

Background

Currently, General Electric (GE) is the largest US investor and employer and one of the biggest exporters in Hungary, with facilities in several manufacturing industries and in the banking sector. According to company sources, the production of certain type of lamps and other lightning components will cease at the company’s manufacturing plants located in Kisvárda in northeastern Hungary and Vác near the capital city, Budapest, in the second and third quarter of 2008, respectively. Reasons put forward by the company for the planned closures include decreasing market demand and the recent significant rise in various production costs in Hungary – most prominently, for energy, labour and storage.

Additionally, the company threatened to move production of one of its most profitable lamps from Vác to another Hungarian plant. However, this would result in a deterioration of productivity indices of the given location. In the long run, due to the company policy of ‘coerced comparison’, it would also endanger the very existence of the plant. The Kisvárda plant is the largest of the two plants affected by the relocation plans; since 2000, its workforce has been reduced from 1,500 to the current 1,000. Nonetheless, GE is still the major employer in the Kisvárda area, where the total registered unemployment rate is much higher than the national average. Thus, those workers who are expected to be dismissed by GE will face low prospects of being reemployed by another company, as most of them are unskilled workers. At the smaller Vác plant, however, a significant proportion of the workers commute from rural areas on a daily basis.

According to representatives of the Independent Trade Union of Tungsram Workers (Tungsram Dolgozók Független Szakszervezete, TDFSZ), the major trade union of the company affiliated to the Democratic League of Independent Trade Unions (Független Szakszervezetek Demokratikus Ligája, LIGA), 300–350 jobs are in danger at each plant. A press release by the company on the issue stated that altogether only 201 jobs are expected to be cut. In the course of negotiations with the employer about the planned relocations, trade union representatives have so far only managed to win smaller concessions, such as suspending any planned relocation between the Hungarian plants.

Industrial actions

In protest against the planned developments, on 21 November 2007, the TDFSZ staged its first demonstration in front of the company’s Budapest headquarters with the participation of 200 employees and trade union representatives – the same day that LIGA held a major demonstration against government reform plans of the health insurance system. The second protest called by TDFSZ was held in front of the factory building in Vác six days later. Addressing some 300 protesters, the General Secretary of TDFSZ, György Selmeczy, stated that the current relocation could jeopardise the workplace of 11,000 GE workers in Hungary, given the increasing tendency for the company to relocate jobs to cheaper production locations, most prominently to China. Mr Selmeczy reminded his audience of a similar situation in 1995, which ended with the trade union concluding an agreement with GE’s top management about saving jobs through the introduction of a more efficient continuous shift-work system. Following the demonstrations, the trade union organised a 30-minute warning strike at the Vác plant on 13 December 2007 when 90% of the plant’s employees stopped working for half an hour. Since the industrial action, the trade union has closely followed any developments concerning the planned relocation within the country.

Views of employers

Commenting on the events, the Vice-President of the Budapest Chamber of Commerce and Industry (Budapesti Kereskedelmi és Iparkmara, BKIK), György Vadász, stated: ‘I think this is the beginning of a sad process’. He added that the Hungarian tax system is not supportive enough of the creation of more and better jobs in line with the EU Lisbon Strategy. Foreign companies involved in manufacturing are increasingly pulling out of Hungary, due to rising labour costs, to relocate to countries with cheaper labour costs, like Bulgaria, Romania or China.

Position of multinational corporations

The Vice-Chair of GE, and President and Chief Executive Officer of GE’s infrastructure division, John G. Rice, highlighted that the company had already invested over USD 1 billion (about €683.2 million as at 7 February 2008) in its operations in Hungary in previous years. Nevertheless, the time has come, he emphasised, for the company to re-think further investments in the light of recent, disadvantageous changes in tax policy, particularly the so-called solidarity tax. This tax was introduced as part of the government’s austerity measures in 2006, requiring large companies to pay an extra 4% corporate tax regardless of their tax-exempt status (HU0607059I). Earlier, Audi Hungaria (AH), another major multinational manufacturer in Hungary and part of the Volkswagen group, voiced concerns that this tax burden will endanger further investments in the country by the car manufacturer.

Máté Komiljovics and László Neumann, Institute for Political Science, Hungarian Academy of Sciences

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

Eurofound welcomes feedback and updates on this regulation

Add new comment