Spain's Unemployment Ranks Swell From Factory Closings and Layoffs
Volkswagen's Seat is the latest in a line of companies cutting back
THE announcement on Oct. 22 that Spain's only national car manufacturer, Seat SA, will close its largest factory, eliminating 9,000 jobs, is one more proof that unemployment has become the country's worst economic problem.Skip to next paragraph
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Seat, Spain's largest manufacturing employer, is a symbol of national pride for Spaniards who contend that they can build and design cars as well as the French or Italians.
Peter Walzer, Seat's acting chairman, said the company would require 1.5 billion deutsche marks ($893 million) from Volkswagen, its parent company, to avoid bankruptcy.
Seat, due to lose 1.25 billion marks ($744 million) this year, will be reduced from 23,500 workers and three factories to 10,000 employees and just one factory. The carmaker, sold to Volkswagen in 1986, buys many of its parts from other Spanish manufacturers. Some of those will close now too.
The Seat workers, as well as others who lose their jobs as a result of the closure, will further swell the ranks of the jobless in a country that already boasts the European Community's worst unemployment rate.
According to two leading measures, unemployment in Spain is estimated at between 16.6 percent and 22.3 percent of the population.
The figures do not take into account a large underground economy, however. Still, the recently reelected Socialist government is increasingly concerned.
Japanese carmaker Nissan, which has its Barcelona factory next door to Seat, has also said it will eliminate part of its 7,000-strong work force. Costs of layoffs
Yoshifumi Tsuji, president of Nissan, made it clear to Spain's Industry Minister Juan Manuel Eguiaragay, who was visiting Japan last week, that the only holdup on the layoffs was the expense of the program. This in turn was delaying further investment in Spain, he said.
Mr. Eguiaragay promised that the Socialist government would soon make it easier for Nissan to reduce its work force.
Mr. Tsuji's complaints were echoed by the International Monetary Fund, which, in a report on Spain last week, said laying off workers should be less expensive. It also urged that state approval for the majority of firings, currently obligatory, be ``eliminated or limited.''
``I would estimate that the average cost of laying off workers in Spain is between 35- and 45-days' pay per year worked,'' says Felipe Manzano, labor relations expert at the Spanish Confederation of Employer's Federations.
Labor law sets the basic layoff rate at 20-days' pay per year worked or 45 days for firing ``without due cause.''
In practice, the 20-day norm is increased in negotiations with unions because employers are afraid that they will have the 45-day rate imposed on them by the courts.
``Objective economic, technological, or structural reasons for laying people off are not usually considered sufficient cause,'' Mr. Manzano says.
``Nobody in Europe would think of asking for complete freedom to fire people,'' he adds, ``but the rigidity of our system puts people off setting up businesses or moving in their factories. How can you promise people a job for life when these days very few companies will last that long?''
It is for this reason, he says, that Spanish employers have been so keen to take on temporary workers. As a result, 38 percent of the work force is on a temporary contract. The maximum temporary contract is three years. Many companies would rather let employees go after this period than make a permanent commitment. Negotiating new laws
Over the next two weeks, employers, trade unions, and the government will sit down to negotiate changes to the labor laws. Prime Minister Felipe Gonzalez and Finance Minister Pedro Solbes have pinned their hopes on these talks - part of an attempt to create a three-year pact limiting wage growth.
Trade unions so far have argued that there is nothing wrong with the labor laws, but they may be prepared to trade job security for better pay raises.
The IMF has made its views clear as to how the government should behave if the negotiations fail: ``No agreement would be better than a bad negotiated one,'' it says.