Job cuts at FIAT despite union opposition

In December 2012, car maker Fiat announced it was cutting around 1,500 jobs at its Polish manufacturing plant. Unions opposed the move, protesting at the scale of the redundancies and demanding help to find other work for those losing their jobs. The unions finally accepted a plan that offered financial compensation to employees who took voluntarily redundancy by the end of January 2013. Unions failed to reduce the scale of redundancies, but government help was offered.

Background

The car manufacturing plant Fiat Auto Poland (FAP) at Tychy in Poland’s Silesia region is owned by the giant Italian car maker FIAT. FAP’s predecessor, Fabryka Samochodów Małolitrażowych (FSM), had been involved in the production of cars under the FIAT brand from 1972. In 1992, FSM was bought by the Italian company and became known as FIAT Auto Poland.

Until recently, FAP employed nearly 6,000 staff and the plant’s annual capacity exceeded 600,000 vehicles. It is the leading car maker in Poland, and the Tychy plant is the largest manufacturing site in the entire FIAT group in Europe.

Impact of the crisis

Although Poland has never entered economic recession, the country’s automotive industry has suffered from worsening financial conditions in the domestic market. It has also been affected by falling car sales across Europe.

The plant’s future prospects were dealt a serious blow when the FIAT company decided to produce a new generation of its Panda model in Italy. The previous generation of Panda was, for a number of years, the best-selling FIAT model. The announcement was made in 2010, and newspaper articles reported that the decision was not driven by economic factors, but was made to save jobs at the Italian Pomigliano d’Arco site near Naples (IT0905019I).

Production of another top-selling model, the FIAT 500, was moved to Poland. Even so, the FAP plant’s output has been steadily decreasing. In 2009, more than 600,000 cars rolled off the Tychy assembly lines, and by 2012 the annual volume had fallen to 350,000. Forecasts for 2013 appear gloomy, with the company expecting production of no more than 300,000.

Collective redundancies and the aftermath

In late 2012, FAP officially announced a raft of collective redundancies at the Tychy plant which would ultimately affect as many as 1,500 staff. The news triggered strong resistance from enterprise-level trade unions. The unions enjoyed a strong position at the company, unionisation being estimated at between 30% and 40%.

Negotiations led to only a slight reduction in the number of jobs losses to 1,450, although the unions did succeed in persuading FAP to introduce a programme of voluntary redundancies. In late December 2012, the eight company-level unions and the employer agreed that employees who took voluntarily redundancy by the end of January would receive a pay-off equivalent to between nine and 18 months’ salary. The final figure depended on how long they had been with the company.

The agreement also specified that certain employees would be exempt from redundancy. They included:

  • those aged 55 or older;
  • those whose spouse was also employed by FAP, so that only one partner would lose their job;
  • those with chronic disease/disability but not eligible for relevant social security benefits;
  • some parents, provided additional specific conditions were met.

By the end of January 2013, 860 employees had resigned from their jobs and collected their redundancy pay. The remaining workers in the redundant group would be gradually laid-off by the end of March 2013, but would have no right to the agreed compensation package.

Help for laid-off workers

Local and central government offered support to the workers who lost their jobs. This was prompted not only by the scale of the job cuts, but also by the fact that they were taking place at one of the best known industrial operations in Poland. Media coverage of the problems in the area was high.

The local labour administration provided an on-site assistance and counselling service to workers. Local government announced plans to launch a comprehensive re-activating programme targeting not only FAP workers but also people losing employment in companies linked to the FIAT supply chain. Funding of PLN 16 million (€3.8 million as at 2 April 2013) has been allocated for the programme.

The Ministry of Labour and Social Policy (MPiPS) said PLN 5.2 million (€1.25 million) from the Labour Fund would be set aside to cover the needs of former FAP workers. Around 400 former workers would be eligible for help such as wage reimbursement, including social security contributions, the reimbursement of the costs borne in looking for a new job, help with starting up in business and money to pay for vocational training.

However, the actual number of jobs to be lost is likely to be higher than 1,450. Tychy’s decreasing production volume will have an impact on the plant’s supply chain and it is estimated that a further 2,500 indirect jobs may go as a result of the changes at FAP.

Commentary

The recent job losses at FIAT Auto Poland may serve as a signpost for the current state of the Polish economy. While the country has not been in recession as a result of the global financial crisis, it is very far from getting back on the path of robust growth.

Secondly, it reflects Poland’s dependence on foreign capital, and the ability of foreign companies to make unilateral decisions about major restructuring, typical of a dependent market economy. Thirdly, the problems at FAP highlight the gap between industrial relations in the public and private sector. The bargaining position of the employee side in the private sector is much weaker, even in workplaces with relatively high union density, as at Tychy.

Jan Czarzasty, Warsaw School of Economics (SGH) and Institute of Public Affairs (ISP)

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

Eurofound welcomes feedback and updates on this regulation

Add new comment