Electrolux and unions agree on 2011-14 restructuring plan

At the end of March 2011 Electrolux and the sectoral trade unions reached an agreement on the 2011-14 reorganisation plan. The company envisages 740 job losses in plants located at Porcia and Susegana, in the North of Italy. The agreement includes both traditional and innovative measures to reduce the negative effects for redundant workers and the areas they live in, including incentives for workers to take redundancy or set up as entrepreneurs, as well as outplacement services.

Background

In recent years Electrolux, one of the world leaders in the production of electrical household appliances, has carried out various industrial reorganisation plans affecting production at its Italian sites. The most recent plan was announced in 2008 (IT0810039I).

At the end of 2010, the Swedish group announced a new reorganisation plan that envisaged changes in two Italian units, with a loss of 800 jobs.

After some months of negotiations, the company and the sectoral trade unions (Fiom-Cgil, Fim-Cisl and Uilm-Uil) reached an agreement on the reorganisation plan. Negotiations also involved the Minister of Economic Development Paolo Romani, and Maurizio Sacconi, the Minister of Labour and Social Policy, local authorities and the territorial employers’ associations affiliated to Confindustria.

The agreement was signed on 31 March and was approved by workers through a referendum. It envisages employing traditional and innovative measures to reduce the negative effects for both redundant workers and the areas affected by the job losses. The company has also agreed to invest in its Italian sites over the next three years.

The agreement is divided into two parts: the first part concerns the industrial strategies announced by the group for the next three years and the new investment for its Italian plants; the second part refers to the social and economic measures provided for cushioning the negative effects of the plan.

The restructuring plan

According to the company, fall in demand due to the recent economic crisis and the need to acquire quotas in new markets (especially in countries in the Far East) have required it to reorganise production processes in some of its European plants.

With regard to the Electrolux Italian sites, the plan includes changes in the plant located at Susegana (in the province of Treviso) and Porcia (in the province of Pordenone), which respectively produce refrigerators and washing machines.

In particular, the company will concentrate on the production of high-quality built-in refrigerators at its Susegana plant, and the production of medium-to-high quality washing machines (with the brands AEG and Electrolux) in the Porcia plant. Production lines will be reorganised and volumes reduced.

Consequently the plan envisages several job cuts: 332 at its Susegana plant (in addition to 115 job losses resulting from the 2008 reorganisation plan), and 198 at the Porcia plant (in addition to 89 job cuts derived from the 2010 reorganisation plan). In total, the agreement allows for around 740 job losses instead of the 800 first announced by the company.

The agreement envisages new investment of €150 million for the next three years, 60% of which will be put into the creation of new products and 40% into the production process.

The social plan

In order to cushion the negative social and economic effects on redundant workers and on the areas where Electrolux plants are located, the agreement provides for a mix of passive and active labour measures, in addition to actions intended to stimulate reindustrialisation.

In particular, the agreement envisages the following measures.

  • Recourse to the extraordinary Wages Guarantee Fund (CIG) on a rotation basis – a public fund used to protect workers’ income, which is financed by companies and the state. The scheme started in April 2011 and will last two years. It involves 600 employees in both plants.
  • Outplacement services. An independent advisor and a provincial committee, composed of trade unions, employers’ organisations and local authorities, will ‘map’ professional needs in the areas where Electrolux plants are located in order to match job demand and supply. Electrolux will offer training and re-training courses to redundant workers. At the same time, companies that offer to hire redundant workers will receive economic incentives. But the new positions must have open-ended contracts and keep the same economic and working conditions Electrolux gave to its workers. In addition, the companies need to be located within 30 km of workers’ homes. If workers refuse three job offers that fulfil these conditions, they will be excluded from re-employment services.
  • Economic incentives. Electrolux will guarantee generous economic incentives for workers who accept voluntary redundancy. Incentives vary depending on when the worker decides to accept voluntary dismissal: the range goes from €30,000 if the decision is taken before 30 June 2011, to €15,000 if the decision is taken after 1 January 2012. Economic incentives for dismissal are also provided for workers who reach all the prerequisites for retirement during the CIG schemes or the mobility procedures. The company will also provide a €22,000 incentive to workers who accept new jobs offered by other companies. Companies that hire workers coming from Electrolux plants will receive €15,000 for each hired worker.
  • Incentives intended to promote forms of entrepreneurship. An advisor, nominated by Electrolux, will offer training and consulting services to workers interested in self-employment. Moreover the company will facilitate access to credit lines and will provide an incentive of €37,000 for workers who start entrepreneurial activities.
  • Availability of industrial areas. The reorganisation process will vacate some parts of the Susegana and Porcia plants. Electrolux will make these areas available to companies that propose new industrial plans, which must include re-employment of some redundant workers.
  • The agreement provides for procedures to monitor the restructuring process and the re-employment of workers. Four bodies involving company representatives, trade unions and local authorities will be charged with monitoring activities. At the end of March, the agreement was approved by workers through a referendum: at Porcia plant, 693 of the 854 votes cast were in favour of the proposals, and at Susegana plant 819 out of 1,087 voters were in favour.

Commentary

In the last 20 years, companies operating in the Italian manufacturing sector, and in particular producing domestic appliances, have carried out several reorganisation plans. These plans have affected production processes and the range of goods produced (shifting from low-medium quality products to medium-high quality products) and they have had a negative impact on the workforce. Structural changes were implemented in order to deal with new challenges raised by the internationalisation of markets and by increased competition (IT0501206F; IT0601304F; IT0810039I; IT0907029Q).

Electrolux was one of the main protagonists of these processes, implementing various restructuring plans that involved job losses. In this case, the practical experiences of restructuring highlighted the role played by the Electrolux participatory model (IT9704204F; IT9706206F; IT9708123N) and, specifically, by the ‘internal anticipation’ of restructuring. This allows for the early involvement of trade unions in analysing the situation and identifying solutions. This practice has enabled the selection of a wide range of tools to reduce the negative effects for workers and, at the same time, to promote new industrial solutions for areas affected by restructuring plans.

Diego Coletto, Università degli Studi di Milano

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