COLUMN ONE : A Chill in Europe’s Factories : Closures and consolidations leave EC workers feeling bitter and betrayed. It could be a taste of what to expect under the North American Free Trade Agreement.
Jim Torrance is one of the lucky ones. A 24-year veteran of the Hoover vacuum cleaner plant in a gritty industrial suburb of Glasgow, Torrance will still have a job next year--but only because his union was forced in January to make substantial contract concessions so that Hoover would not close the plant.
Workers at the Hoover plant near Dijon, France, never had that chance. Faced with substantial losses from its European operations, Hoover is closing its Dijon plant and moving production to Glasgow, where labor costs were cheaper even before January’s contract concessions.
Daniel Ferrari, a milling machine worker at the Dijon plant with 12 years of seniority, blames Hoover--not the Glasgow workers--for his pending layoff. “Before long, I think they’ll also be victims of Hoover,” he said.
All over Western Europe, workers such as Torrance and Ferrari are getting a nasty lesson in the raw edges of capitalism. Multinational companies, whose investment is welcomed in times of prosperity, are demonstrating that they can retreat to their greenest pastures when the going gets rough.
Right now the going is plenty rough. Stagnant or declining European economies have turned black ink to red for many manufacturers here. The European Community’s new single market, by bringing down barriers to commerce among the 12 EC countries and dictating uniform product standards across Europe, has made it easier for companies to close their least efficient factories and consolidate production at the most efficient.
“Job losses are the painful consequence of this necessary restructuring in the current, difficult economic situation,” said Jack Clark, a British member of the European Parliament. “The ability to concentrate production on one site . . . is the very essence of the single market.”
What is happening here may provide a taste of what to expect on the other side of the Atlantic if Congress ratifies the North American Free Trade Agreement (NAFTA), which former President George Bush signed last year with Canada and Mexico.
Variations in salaries and benefits within Western Europe pale in comparison with the differences in North America. Average U.S. manufacturing wages are about eight times as great as those in Mexico. American politicians such as Ross Perot have warned that NAFTA would devastate U.S. industry as companies flocked to take advantage of Mexico’s cheap labor.
Recent analyses suggest that those fears may be exaggerated. Both the U.S. government’s International Trade Commission and the Institute on International Economics, a private Washington think tank, argue that the trade agreement would actually create more jobs in the United States than it would destroy because it would open new markets in Mexico for American goods.
Both studies, however, acknowledge that there would be losers as well as winners. The commission predicts U.S. job losses in industries ranging from automobiles to fresh roses. The institute says NAFTA would inject 316,000 jobs into the U.S. economy by 1995--but at the same time push 145,000 other jobs from the United States to Mexico.
Manufacturers have long moved where costs are low: Witness the stream of U.S. companies from the heavily unionized North to the less unionized South, or the growth of Japanese factories in the newly industrializing countries of Southeast Asia.
What is unusual about today’s controversy in Europe is that it is in large measure self-induced, the result of a voluntary effort to eradicate national barriers to the free movement of goods and services. In North America, the same logic underlies the trade agreement.
For Europe, one consequence is a spurt in internal competition for increasingly scarce manufacturing jobs. Europe is only beginning to face some knotty problems: Can some countries (notably France and Germany) afford to insist on maintaining high labor costs when one of their partners (Britain) permits lower costs? Alternatively, if the entire European Community is forced to rise to the most generous level, will jobs hemorrhage to the rest of the world?
Here in Europe, labor costs alone do not dictate decisions on where to locate manufacturing facilities. Worker productivity, proximity to markets, the quality of local transportation and telecommunications systems--all these and more are important.
Thus, even as Hoover is moving from Dijon to Glasgow, Nestle, the Swiss-based food company, is in effect doing the exact reverse: pulling out of Glasgow and beefing up production in Dijon.
But more often than not, France is coming out on the short end. Rockwell Graphic Systems, a manufacturer of printing equipment, is scaling back its work force in Nantes and beefing up production (but not the work force) in the British town of Preston. Kimberly-Clark, another U.S.-based multinational, is slashing its payroll near Rouen by 312 jobs and eliminating all products except Kleenex, although it denies charges by its Rouen workers that it is beefing up its British work force.
Grundig, a German-based electronics manufacturer, had considered closing its plant in the western French town of Creutzwald and moving to Austria; it put those plans on hold after unions protested and local and national politicians intervened.
Nowhere has the uproar been greater than at the Hoover plant in Dijon. Hoover, a subsidiary of the U.S. household appliance maker Maytag, announced in January that it will begin phasing out vacuum cleaner production in June and boost output in Glasgow.
About 200 jobs will evaporate in the process--there will be about 600 layoffs in Dijon and only 400 new jobs in Glasgow--but Hoover says increased efficiency will allow it to produce more in Glasgow than it now does at the two plants combined.
French workers and politicians warn darkly that Hoover is just the beginning, that Britain is siphoning jobs from France by providing cheap labor and sweatshop working conditions.
They even have a name for it: “social dumping.”
Florence Mignard, a 38-year-old supervisor at the Hoover plant in Dijon, said Hoover’s Glasgow workers were “blackmailed” into accepting poorer working conditions so that Hoover would not close its plant there. Isabelle Meugnot, 30, who has been working at the plant for three years, said French workers should not give up their rights, even to compete for jobs with countries that have fewer such rights.
Richard Rankin, Hoover’s European marketing director, acknowledged that Hoover took advantage of Britain’s more relaxed labor laws to extract agreements from the employees--a one-year pay freeze, reduced night-shift bonuses, restrictions on strikes and greater management control over work assignments--that probably would have been out of reach in France.
Eddie McAvoy, the top official of the Amalgamated Engineering Union at Hoover’s Glasgow plant, said the company issued its contract demands to the union on Jan. 20 and threatened to open negotiations with the Dijon workers if the demands were not accepted in two days.
“The Hoover workers negotiated with a gun to their heads,” said Richard Leonard, an economic analyst with the Scottish Trade Union Council. The union obtained a few sweeteners, including lump-sum payments to workers who would lose some of their night-shift bonuses, before accepting the deal.
Hoover’s rank-and-file Glasgow workers mostly don’t want to talk about what happened. Those few who discuss it say their new contract leaves them about as well off as they would be in France--if they still had jobs. “This is no social dumping ground,” Torrance said.
Pay levels at the Glasgow plant, reportedly about $275 a week, are comparable to what they are in Dijon. Benefit levels are more generous in France, partly because most health care costs are financed through payroll taxes in France but through income taxes in Britain.
More important, a gulf looms between Britain and the Continent over worker rights. All but one of the EC’s 12 member nations have signed on to the Community’s so-called Social Charter, which aims at providing workers throughout the EC with equal rights in such areas as sick pay, maximum workweeks, job safety and vacation days.
The one holdout is Britain.
“There are significant differences as to what are appropriate working conditions in France and what are appropriate working conditions in Britain,” said Rankin, Hoover’s marketing director. He warned that France might price itself out of the labor market if it insists on worker rights that are too expensive for employers to maintain.
British Prime Minister John Major, in a speech here just a week after Hoover’s decision to beef up its production line, suggested that his decision to keep Britain out of the EC’s charter on worker rights contributed to Hoover’s move. He noted that 14 years of Conservative governments, under first Margaret Thatcher and then himself, had swung the balance of industrial power away from trade unions and toward employers.
“The number of days lost from strikes has dropped to record low levels,” Major said in his Glasgow speech. “We’ve abolished the closed shop. We’ve outlawed secondary action.”
That is precisely why French officials are demanding that Britain sign the EC charter on worker rights.
“An integrated social policy has never been more necessary now that foreign investors are trying to play rival member (EC) states off against each other and can exploit the gaps created,” French Foreign Minister Roland Dumas told fellow EC foreign ministers last month.
But France has to compete for jobs not only with its European neighbors but also with the United States, Japan and even the industrializing countries of the Third World. If the EC is to be competitive globally, said Leon Brittan, the British Conservative Party politician who is responsible for EC trade policy, “we cannot erect a cocoon around the Community.”
Labor costs, however, are far from the only consideration when companies decide where to consolidate. Nestle calculated that its gains in efficiency would more than offset its somewhat higher labor costs if it moved production out of Glasgow and beefed up in Dijon.
The Nestle move is a three-cushion shot. Late this year, the Swiss food giant plans to move production of its Lion chocolate bar from Newcastle, in northern England, to Dijon. Then early next year it will switch production of its Blue Riband and Breakaway cookies from Glasgow to Newcastle.
That will cost the Glasgow plant nearly 400 of its 550 jobs. The remaining workers will continue temporarily to make a third cookie, but Nestle will let them go and close the plant unless it can find a buyer. Meanwhile, it has set aside more than $350 million to find new jobs for the workers it will lay off.
Nestle’s workers are unimpressed. “We’re just pawns,” said John Wren, a 42-year-old warehouseman with 16 years of seniority. He said he does not believe that Nestle is seriously looking for a buyer for the Glasgow plant: “The only thing they’re serious about is laying people off.”
John Glass, the second-ranking official in Scotland of the Union of Shop, Distributive and Allied Workers, warned that Britain is in danger of becoming “the Taiwan of Europe,” able to attract investment only because of cheap labor.
“The French government is prepared to fight for its work force,” he said. “This government is just rolling over.”
Graham Millar, managing director of Nestle Rowntree, the confectionery division of Nestle’s operations in Britain, said the EC’s single market makes it more profitable for the company to centralize production facilities. “Europe is becoming more and more one country commercially,” he said.
On that point, at least, workers and management agree.
“We’re in Europe now,” said Patrick McCormick, the top Scottish official in the Union of Shop, Distributive and Allied Workers. “The companies are looking at Europe as one country, and it makes sense from their point of view to centralize production in a single plant. The victims of that policy are the workers.”
