Thursday, January 29, 2009

Firms cut jobs, working time to weather crisis

As the effect of the economic crisis trickles down the automotive value chain, more companies are forced to reduce their work force by short-time working, and in some cases, by cutting jobs.

The effects of the car market collapse have reached the electronics industry. While BMW already had re-started production in Munich and Leipzig after an elongated period of Christmas holidays, Daimler recently has announced to reduce working time for six of its plants in the time span through March. 40,000 production jobs are affected at this company alone.

Now the weak demand in the automotive industry as well as in other segments of the economy is hitting the suppliers. Infineon Technologies, the largest automotive chip vendor in Europe, has announced working time reductions. Against the background of declining utilization, 2,200 workers in the company's Regensburg plant are working on reduced schedule since the beginning of the year. In addition, about 1,800 workers in the company's Dresden fab will have to reduce their weekly working hours. The period for short-time work will start in February and is scheduled to last for six months. The company also has announced to temporarily close some of its production lines.

Similar moves also have been announced from other points of the automotive value chain. For instance, Bosch group as one of the major automotive suppliers has announced short time work. About 10,000 jobs will be affected in the entire group. While not all of them are employed in the automotive segment, activities related to these customers feel the downturn particularly hard. The company, for instance, provides injection pumps for diesel engines; a market where the company claims market leadership.

Cost-saving measures
Short-time working is regarded by the industry here as an instrument to adapt production capacity to low demand. Workers will receive a somewhat reduced payment during this period, but reduced hour working is not seen as a measure to cut costs in the first place. The difference between normal salary and reduced salary is paid in part by the employment authorities. "Short-time working is used to avoid cutting jobs and keeping the expertise in the company," explained a Bosch spokesperson. "We believe that this way we can save our competiveness over periods when business does not run so well and when the downturn is over we can do a flying start."

Short-time working is only one of several instruments in the employer's tool box here when demand for working capacity is not in line with order entry. Another one is 'working time accounts.' This is when industrial activity is high and production workers do unpaid overtime. These working hours are 'deposited' in a 'working time account', and when production utilization declines, the workers can withdraw their credit in that they reduce their working time while being paid in full.

This can be done on an individual or a collective basis and, of course it needs to be negotiated between workers and employer. In Germany's automotive industry, the instrument is very popular and hitherto has helped to get away without major job cuts.

However, while it is used widely in production segments, designers and developers jobs normally are not eligible to such working time models. "We now develop products that come to market in four to six years. It would be counterproductive to send engineers off for reduced working time," a Bosch spokesperson explained.

In Austria as well as in Germany, the decline in demand affects production activity. PCB manufacturer AT&S for instance has negotiated reduced working hours for some of its activity segments after already having announced to transfer 450 jobs in product segments where not the latest technology is required to Asia. The company achieves about 10 percent of its sales with automotive customers; other customer groups include industrial and medical electronics.

Beginning February, the company now plans to reduce working hours in its Klagenfurt production site over at least three months, affecting about 130 workers. The company plans to reduce its production by "up to 50 percent", as a company spokesperson explained. "This means that we can decide on short notice to reduce it only by 20 or 30 percent, if the order situation demands it," he said hinting that the company still expects to successfully land some orders.

In other companies, the situation is worse. After having seen its order to decline drastically, PCB and component manufacturer Vogt AG, a subsidiary of Japanese Sumida Corp., announced to cut jobs already in late 2008. The company, which also sells to customers to the equally suffering telecommunications industry, announced details that 219 workers will lose their jobs.

- Christoph Hammerschmidt
EE Times Europe

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