• Fighting Plant Closures

  • Auteur Wolfgang Menz , Sarah Nies , Dieter Sauer , Richard Detje | 25 May 09 | Posted under: Contemporary Capitalism
  • The crisis on the international financial markets has had a powerful impact on the real economy. The explosive nature of the situation is produced by two crises coming together and to a certain extent reinforcing each other: asset losses, indebtedness and the credit crunch on one side, and faltering accumulation processes in the economic downturn on the other.  

    When profit margins sink and demand falls, the pressure on businesses grows. And that sets in motion a further critical process of capitalist restructuring: jobs are cut, business units or even whole sites are shut down. To get an idea of the realtive dimensions of this: even while the economy was still booming in 2007, 27,500 companies in Germany filed for bankruptcy, and 440,000 blue- and white-collar workers lost their jobs. In 2009 the curve of bankruptcies and therefore crisis-related closures is expected to rise steeply.

    Plant Closures in Financial Market Capitalism

    In financial market capitalism, plant closures and in particular offshoring – in other words closing a plant in order to continue production more cheaply and profitably elsewhere – are only expressions of critical underlying processes. Our study shows that a large number of the businesses that are closing factories are doing so not because they had been losing money, but because their profits did not fulfil the expectations of the financial markets. Here are three examples of international conglomerates in which a radicalised profit strategy proved to be the undoing of the local workforce, in spite of bitterly fought strikes and disputes:
    l AEG’s owner Elektrolux belongs to the listed Wallenberg-Holding with the telling name of Investor, which also has a stake in Saab, Scania, Ericsson, ABB and the SEB bank. If the utilisation demands of “investors” are not satisfied, the stock in question risks being dropped from the portfolio. AEG was a financially sound business. Production was profitable. However, the capital yield earned in Nuremberg was not sufficient to keep driving the share price higher and to pay out ever higher dividends. For a financial-market-driven management team, that was reason enough to pull their investment.
    l Otis Elevator based in Farmington (Connecticut, USA) is one of the world’s leading manufacturers of lifts, escalators and moving walkways and since 1976 has been part of the United Technologies conglomerate based in Hartford, CT. In 2001, Otis Deutschland recorded a return on sales of 14.8%. But headquarters in the USA stipulated that profits had to rise by one percentage point every year. In 2002 they were 16.3%. For 2003 the expectation was 17%. “We are a company that operates on the principle of shareholder value,” said Otis chief Ari Bousbib when he took office in April 2002, adding: “My focus is on closing production sites in cost-intensive regions.”
    l The Finnish Kone Corporation is the fourth largest producer of escalators and elevator systems and is listed on the Helsinki Stock Exchange. When the group management announced back in March 2005 that it was closing all escalator production in Hattingen, the plant was in the black. But the yield wasn’t in double figures as demanded. “Because the Finnish group management under Mitta Alahuchta is only interested in creating value that produces dividends for shareholders, the escalator plant has to close despite being in the black, and production will be moved to China and the UK,” assesses Otto König, head of the union delegation at IG Metall. An alternative proposal, which would have created a European centre of excellence for escalators, was rejected by the group. Production jobs at Kone in Hattingen became another victim of the shareholder value strategy.
    The plants mentioned above stand out from the constant process of “bleeding” capital from the accumulation process. These were not lossmakers, but profitable factories, operating with good profit margins. Many of them were “quality producers”. A well- ualified and experienced workforce made high-quality products for a domestic and international market with guaranteed sales. But still the business was either closed down or relocated offshore.
    Today decisions on where to locate production are taken in the context of financial-market-driven capitalism. Since the mid-1990s, shareholder value has developed as the benchmark of corporate management – and not just among listed corporations. The business portfolio is no longer judged primarily on the potentials of real value-creation processes, but on earnings indicators, expectations of rising shareholder value and above-average cash flow.
    This process of financialisation of corporate management is basically indifferent to the real structures and cycles of production and operating processes. Any sector or company that achieve high yields with high added value, such as for example in the premium segment of the motor industry, is definitely on the high road to industrial development. However, in the high-volume business sector, management by financialisation tends towards a policy of permanent cost reduction which can end in a low-road strategy with no regard for skills or brand names. The argument that these types of strategy often fail to take off in highly developed buyers’ markets does not have much weight with the protagonists.
    Under these conditions, plant closures – even with a view to offshoring – have become an instrument that is increasingly being built into the calculation when putting together a portfolio and is now an integrated part of corporate restructuring policy.
    We therefore describe these as plant closures of the financial-marketbased type.
    Under financial market capitalism, plant closures and offshoring are therefore both crisis- and profit-driven restructuring processes. For the workers it means living under constant pressure.

    Pressure on Workers

    Plant closures are by far the worst-case scenario for the interests of the workers affected. In no other case is the threat to social existence as palpably felt – in places where production, sales, research and development cease the labour force is no longer in demand and unemployment looms, which in Germany leads to official impoverishment after one year. The ever-present nature of this threat has allowed plant closures to become one of the most powerful tools in the corporate armoury.
    Management’s calculation, taking into account a defensive union representation of interests, means that sermons about participatory business management are quickly forgotten. Negotiations with workforces over location prospects are often not even taken into consideration, even elementary rights of information are ignored. What occurred at Nokia in Bochum at the beginning of 2008 had already happened four years earlier at Otis in Stadthagen: The construction of a parallel plant in Romania or the Czech Republic was initially sold to the workforce as an expansion of capacity – until the site’s closure could no longer be concealed. According to a study by the Economic and Social Institute (WSI) of the union-affiliated Hans Böckler Foundation, it is mainly businesses in the medium-sized category (100-499 employees) in which workers and works councils are kept fully informed of the facts.2 The wind of an authoritarian regime is blowing across the business landscape, in which reconciliation talks are initially refused, as at Bosch in Leinfelden in 2003, or as in 2006 when the management of Panasonic in Esslingen issued temporary injunctions against works meetings and threatened employees with sanctions. At the same time, the structural limits of company co-determination in transnational corporations become only too clear when local negotiations with managers who are not authorised to take strategic decisions lead to farce: at escalator producer Kone, decisions on location policy are taken in Helsinki and not in Hattingen, and at the construction vehicle producer CNH they are taken at Fiat headquarters in Turin, not in Berlin.
    Site closures become the worst-case scenario not least in terms of political publicity. The large amount of media attention that accompanied the closure of AEG in Nuremberg is the exception, not the rule. For the most part, publicity is restricted to the immediate regional locality, if not to the plant itself. That is also reflected in a highly fragmented publicity machine within the unions themselves. It is therefore no wonder that the terrain is occupied elsewhere. Sovereignty of interpretation in media reporting is held by management and employers’ associations, whose market and competition strategies are accepted without question, along with consultants and economists, who play an important role in the “ideological foundation as well as the scientific legitimation”3 of location policy. 
    “If you fight, you may lose…” – that seems to apply only too well to union battles against plant closures.

    Resistance Perspectives

    But if you don’t fight, then you’ve already lost, say many workers – not for the sake of banging their heads against the brick wall of a cemented system of property ownership, and not without any prospect of success. Although it is true to say that in only a few cases were they succeeded in keeping the local plant open: at Peterswerft in Wewelsfleth in Schleswig-Holstein, which was even rescued from bankruptcy; at Bosch-Siemens-Hausgeräte in Berlin, although here the cutting of about a third of the jobs along with hefty reductions in staff costs led to massive conflict with a large part of the workforce; at Kaltenbach & Vogt in Leutkirch through a management buy-out, and at Drauz Nothelfer by selling the Ravensburg production site; and at automotive supplier Lear in Gustavsburg, Hessen, whose relocation to the Polish city of Tychy has been postponed to 2012 at the earliest – to name a few examples.
    If the primary goal of preventing a plant closure is not achieved, there is a second criterion of success: the, at least, temporary protection of reproduction conditions through redundancy payments and/or the funding of an occupation and training organisation by the company. Internal union mobilisation has succeeded in improving these conditions in all cases.
    Our case documentation shows that there is a third criterion of success: achieving a perspective of resistance at a time in which the social partnership of co-management has been abrogated on the employer side.
    l Every plant closure has a prehistory. In more than a few cases this includes the breaking or undermining of, or the pressure to renegotiate, agreements on securing the production location. Only through the workers’ resistance can we enforce the rule of law that binding agreements must be kept.
    l Where shutdowns are considered to be disinvestment decisions by the company, the workforce must fight to enforce negotiations with the works council and union and compliance with basic rights of codetermination.
    l Siemens is not the only case in which a company-funded and company- owned internal “worker-representative” organisation (AUB) was established in an attempt to drive the union out of the factories and out of the company. Winning recognition for an autonomous unionised representation of interests will require a return to social conflict and worker mobilisation.
    l And finally, it is only through tangible and visible resistance that we will be able to find out whether the announcement of a site relocation is part of genuine reorganisation plans, or whether its main purpose  is to enforce wage cuts, longer working hours and poorer working conditions locally.

    Innovative Practices

    The developement of resistance perspectives includes innovative practices. Examples are: at automotive supplier Norgren in Großbettlingen, Swabia, where the works councils succeeded in mobilising the top management of their most important customers (Daimler, Volvo, MAN, ZF) to intervene against plans to relocate to Eastern Europe; at the Alstom power infrastructure company in Mannheim, where instead of strikes, ever more painful economic pressure was exerted on the company through shopfloor meetings; at Infineon in Munich-Perlach, where under the most difficult conditions – a mostly unorganised workforce in diffuse departments, labyrinthine factory premises, a divided works council (AUB) and a strike-breaking strategy on the part of the employer – they were able to suspend chip production with three warning strikes and eight days of total strike; at Bike Systems, where the workforce not only de facto occupied the plant, but as a symbolic act of resistance organised production under their own regime, thereby raising their public profile across the region. At Opel, where in response to the location strategies of an international conglomerate they managed to organise a transnational network of works councils which devises alternative strategies as part of the global sourcing process.
    We encountered innovative practices not just in the area of social conflict,  but also in the representation of interests. “Internally” on the one hand, by overcoming “representative” or “proxy” politics and developing new forms of participation-based management and union policy; and “externally” on the other, by creating counter-publicity in civil society, however limited and fragile its extent.4 
    And last but certainly not least, innovative practice involves a change within the institutional power arenas: the legitimacy of industrial action for so-called “collective agreements”. In Germany – where the right to take industrial action over wages exists, but not the right to strike on issues unrelated to wages policy – it means that industrial conflicts are likely to escalate. There is certainly potential for expansion of the collective agreement instrument. So far these have been about enforcing redundancy payments and setting up occupational and training organisations. But why not use them to demand redundancies by collective agreement for a longer period (say five or six years)? Legally that is currently still a grey area. This type of demand would in our view constitute an additional contribution to an innovative practice of demands that would make plant closures and relocations much more difficult. 

    Learning Perspectives

    Even though union battles against plant closures have had some success, they are predominantly an expression of a defensive perspective. They aim at mitigating the social consequences of plant closures and aiding the transition to new employment. The price that companies have to pay is driven up, although in most cases not so high that they abandon the idea of closure or relocation. 
    We can break through the defensive character of these battles if we attempt to exert influence over core company policy at an early stage. With plant closures of the financial-market-based type, to a certain extent this has better prospects of success than in obvious cases of crisis, since the workforce can mobilise options for exerting economic pressure and – backed up by public pressure – also attack the legitimacy of the company’s policy. This works best when works councils and unions go into a dispute with alternative proposals for the company and perhaps even for the industry, whereby the issue is no longer simply whether production is relocated, but also what, how, and how much. We call these campaign perspectives “getting corporate”. Using alternative expert reports as the basis, it can be shown that a future for the location or the region definitely exists. This strategy with its offensive perspective goes beyond traditional co-management, especially if it does not confine itself to the level of technocratic “proxy politics”, for the strength of a negotiating position depends on the extent to which the workforce and public are able to exert pressure. Furthermore: this strategy works best where it can be combined with an industrial or economic policy strategy, and therefore where the demand for influence over investment policy can be put on the agenda not just for a single company, but for the whole sector. This strategy was followed in Germany in the 1980s and in Italy in the 1970s.5 It still has relevance today. Here we can see that in the campaigns against plant closures, there has been movement in the traditional structure of relations between workers and their management and union representatives. It also points to a new quality in the conflict of interests: new forms of resistance, mobilisation and politicisation of workers’ interests is one side, a new form of “getting corporate”, an expansion of demands for co-determination, exertion of influence over investment and product decisions are the other side.
    Political explosive force and an effective strengthening of workers’ positions arise when both sides come together: if resistance and mobilisation have a content perspective and if alternative product and production proposals are backed up not only by the argument of “economic sense” in itself, but also by a workforce that is ready to fight, and by public awareness.
    The cases we looked at reveal that this is not so easily achieved. But they have also shown that as an approach, it could work, and above all that much can be learned from the struggle. They can be used as encouragement, to intensify learning processes and so help to ensure that the struggles experienced by employees and their representatives will be drawn upon in future battles and thus improve the chances of success. 


    1 In an ISF Munich and WISSENTransfer project commissioned by HBS on the subject: “Conflicts and Closures – An Inventory”, we have documented over 50 cases in the metal and electrical industry in the period 2000-2008. www.wissentransfer.info We would be interested to hear of similar empirical studies from other countries: buero@wissentransfer.info
    2 See Elke Ahlers/Fikret Öz/Astrid Ziegler: Standortverlagerung in Deutschland – einige empirische und politische Befunde, Hans Böckler Foundation, Düsseldorf 2007, p. 53.
    3 Geny Piotti: Why Do Companies Relocate? The German Discourse on Relocation. MPIfG Discussion Paper 07/14, Cologne, p. 23. 4  See also Mario Candeias/Bernd Röttger: Betriebsräte in der Zivilgesellschaft, Manuscript, Jena 2008.
    5 See for example Bruno Trentin: Arbeiterdemokratie. Gewerkschaften – Streiks – Fabrikräte, Hamburg 1979, and Bruno Trentin: Die andere Gewerkschaft. Vom traditionellen Syndikalismus zur politischen Bewegung, Hamburg 1982.

    Richard Detje is a member of the scientific association for the analysis of capitalism and social policy WISSENTransfer. Sarah Nies, Wolfgang Menz und Dieter Sauer are members of the Institut für Sozialwissenschaftliche Forschung, (Social Science Research Institute) in Munich.  


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