«The appearance of multinational companies in Hungary has, in general, been greeted positively by public opinion. However, some professionals dealing ...»
After almost 10 years of negotiations, in 1990 the founding document of the Magyar Suzuki company showed that Japanese capital would have a 51 per cent stake in the company (Suzuki motor company 40 per cent, C. Itoh 11 per cent, and the Inter national Financial Corporation 9 per cent). With the establishment of the Japanese-H ungarian car factory particular market consider ations played a role: (a) at the beginning of the 1990s the average age of Hungarian cars was 10 years; (b) out of three million cars, almost one-third had owners who urgently wanted to replace them;
these cars were more than 10 years old and two-fifths were environment polluting two-cylinder cars; (c) after 1990 cars imported into Hungary had a 35 per cent customs duty placed on them. The five-door Swift model and the four-door Sedan model manufactured in Suzuki’s Hungarian factory were to constitute part of the company’s world market strategy. This was in line with the production of a small car in India, a middle category and a larger Sedan version in Hungary, and a Land Rover-type vehicle (the Santana) in Spain. Magyar Suzuki planned to produce 50,000 units annually, but the plant’s capacity enables it to manufacture 100,000 units. A t the time of opening the factory, the composition of production in total value was intended to developed in the way outlined in Table 12.6.
The starting plan was based on the assumption that a large-scale modification and powerful rise in the exchange rate of the yen would take place, and in line with this a devaluation of the HUF.
The company’s 17 billion yen credit stock grew from HUF 10 billion to HU F 16 billion in the first half of 1993. In order to finance the more expensive credit, the company raised the basic HUF capital from HU F 5.5 billion to HUF 13 billion through the Hungarian partner contributing HU F 1.3 billion from the credit of the Autokonszern company (a conglomerate comprising almost 50 state-owned firms), guaranteed by the Hungarian government.
When Magyar Suzuki began its operations the Hungarian partner Employment Relations in Multinational Companies 263
Source: Gabor Bakos (1992) ‘Japan and Central Europe: New Subregional formation and Japan’s presence’, Tokyo: The Institute of Economic Research, Hitotsubashi University, p. 33.
had a 40 per cent share in ownership, but after raising the capital this decreased to 25 per cent ownership plus one share. These changes in ownership structure were reflected in management changes, in particular the Hungarian managing director was re placed by a Japanese national.
The significant increase in the exchange rate of the yen also affected the cost of components coming from Japan. Magyar Suzuki protected itself against the increased cost of imports by bringing forward the date on which it was stipulated that 50 per cent of components allocated for production would be Hungarian and 10 per cent West European. This meant that by the end of 1993 the Hungarian production of components in Esztergom represented 20 per cent of the total value, and a further 30 per cent came from other domestic suppliers (where the original figure for the latter had been 20 per cent).
This was also of key importance, because the conditions for customs duty exemptions on exports going to the European Union require that a minimum of 50 per cent of the product should be of domestic origin, and only in this way could Magyar Suzuki be counted as a Hungarian product. Thus the intended exports to the EU started earlier than the actual time planned.
The effect of the investment in employment growth on the labour market - given that Esztergom had a 20 per cent unemployment rate in 1993, against a national rate of 14 per cent - was significant.
At full production the central factory (in the town of Esztergom) provided 1000 jobs, while the supplying factories provide employ ment for between 17 and 18,000 workers. In less than two years of operation the Magyar Suzuki company had contracts with 33 Hungarian supply manufacturers. By April 1993, 150 Hungarian workers had taken part in training at Suzuki motor company’s Kosai (Japan) plant, while the majority of employees in Hungary had 264 Industrial Transformation in Europe received training in Hungary itself. Suzuki provided 25 individuals to help the Hungarian management at the company, and likewise 25 other individuals are active in the area of production management.
In selecting the labour force, young (20-25 years), well-qualified applicants had an advantage; at the beginning there were three times the number of applicants than available jobs, but later this proportion decreased. Those Hungarians who took part in further training in the Suzuki plant in Japan criticized the Japanese conditions of work (the daily schedule, the one and a half hours’ overtime, meals etc.). In spite of these points, only 15 individuals resigned from the company. The Japanese company management is extremely satisfied with the standard of the Hungarian maintenance operators, and in general they feel the Hungarian workers are too well qualified.
With regard to wages, multinational companies active in Hungary follow two types of strategy. Either they tend to follow the local labour market and take into account comparatively significant fluctuations, or they pay 20-30 per cent more than the average in order to win the loyalty of the labour force. The Magyar Suzuki company has followed the second approach, on the whole. Workers on the production line earn between H U F 25,000 and 27,000 per month, while those involved in production management and fore men receive 20 per cent more than the line workers; apart from this employees are also eligible for a production-related premium. The performance of the labour force is evaluated twice per year —and that applies to both shopfloor workers and management.
In the areas of work schedules and work organization the Japanese company management employs the characteristic prac tices used with other workforces in Japan (job rotation, QC, etc.).
In connection with this the Japanese management has complained that the Hungarians are individualistic and their team spirit is weak (Neumann, 1993). At Magyar Suzuki the regulatory mechanisms and instruments for labour relations are not yet fully settled, nor are the methods for human resource management. In spite of this it is possible to assess the characteristic attitudes of the company management towards the trade unions. A t the factory the organiz ation of trade unions was present from the beginning. On the occasion of the factory’s first anniversary, 7 per cent of the workforce were members of the Vasas trade union. This union had initiated the organization of employees’ interest representation from outside the factory. The company’s management does not have a friendly relationship with any trade union; besides other things, this clearly illustrates that so far the management has not felt the lack of such a partner with whom it could make a collective Employment Relations in Multinational Companies 265 contract, as regulated in the stipulations of the new Employment Law. Additionally the Suzuki management has banned the gather ing of trade union members on the premises of the company. In the
view of one worker:
We need to realize that we cannot act upon our interests with any meaningful results if we do not have a trade union. One year ago this autumn we announced ourselves at the company, but they didn’t even allow the regional trade union leadership into the factory, because they said it is a custom-free area, and thus an organization from outside the factory cannot start organizing within it. (Worker, trade union leader, quoted in N epszava, 1 October 1993: 4) Not only has no place been given to the trade union, but the newspapers which are usually pinned on the wall in the factory - and which it had been promised would be allowed - were, in the event, prohibited. In reply, the trade union arranged a meeting of workers in the dining room of the neighbouring premises of the former Ecom company. The basic membership of the trade union was almost doubled to 200 because of the effect of the meeting. The trade union’s main purpose was to persuade the management of Magyar Suzuki to establish fair labour relations, not to adopt an uncompromising position. The car manufacturing branch of the Vasas trade union laid down that a collective agreement could be linked up with their own.
Nevertheless, the company management demanded that the employees should participate in any decision in line with the management’s own requirements. Without this it was felt to be impossible to create guaranteed, undisturbed production in which there would be a two-sided - top-down, bottom-up - communi cation structure. This explains why a Works Council was brought into existence in Magyar Suzuki in October 1992, although elections for the Council only took place early in the summer of 1993. With reference to all this, one of the leading managers of Magyar Suzuki
the Works Council is perfectly appropriate for establishing the paternal istic model of Japanese management in Esztergom. (in Heti Vilaggazdasag, 21 August 1993: 81) The nine-member Works Council sits monthly, and it mainly deals with such issues as the production plan, training and wage increases.
Although the Works Council is not an interest-protection body, and its regulations do not state that it has such a purpose, in Magyar
Suzuki it does in fact provide several interest-protecting functions:
We are not involved with interest-protection, but even so we have achieved much in that direction. We have installed an extremely expensive extractor system at the end of the production line, where the Industrial Transformation in Europe motor engines are tested. There are many workers who commute to the factory and we have solved their problems by using our own and hired buses. However, the main question - in fact, I can say the key question is that of wages and bonuses. For a gross wage of between HUF 16-19 thousand the em ployees have to fulfil hard and highly quality-oriented tasks. I think that this will be the most important issue facing the increasingly strong trade union. (Worker, Factory Works Council member, in N epszava, 1 October 1993: 4) The central point of the friction between management and labour is the question of basic wages. The bulk of the workforce is aged between 23-25, and they receive a monthly basic wage of HU F 17it is virtually impossible to live on this (in 1993 the Hungarian subsistence level was reckoned to be HU F 13,459). This is why the trade union is attempting to reach agreement with the Magyar Suzuki management over average wage rises on a sectoral basis, index linked to achieve a balance with high inflation, and the alleviation of social problems. However, the company management does not favour index-linked wages, and they are trying to empha size that annual wage rises should take account of the hours spent at work and productivity. A t the moment, the ability of the Suzuki management to impose its preferred system of labour management and rewards remains in doubt because of the strength of insti tutionalized expectations and revitalized labour organizations.
Transformation of State Property without the Participation of the Employee: the Example of the Malev and Lockheed Joint Venture Establishment o f the Joint Venture So far there has only been one instance of a strike in a multinational company operating in Hungary. The strike that broke out at Aeroplex Central Europe (ACE) originated largely from the way privatization was achieved which forced the workers to initiate a strike in which they put their own jobs at risk.
At the end of 1990, the management of the Hungarian Air Transport Company (hereafter Malev) began negotiations with the US company, Lockheed Aircraft International Service (hereafter Lockheed), on the possibilities of establishing a joint venture company for aircraft repairs and maintenance. In February 1991 it was officially announced that a proposal of intent had been signed with regard to establishing the joint venture. The two companies each contributed 50 per cent of the basic capital to establish a limited liability company whose main task would be the mainten ance of all Malev aircraft, as well as the aircraft of other airline Employment Relations in Multinational Companies 267 companies. The joint venture’s other purposes were to modernize the methods of aircraft maintenance, to introduce modern manage ment and working methods from the US partner, and to acquire accreditation and licences from the aircraft authority representing the most advanced Western countries - namely, from the FAA.
The Malev workers and their representatives in the trade unions were offended by the fact that the company’s managing director made decisions about the joint venture without even informing them, let alone seeking their agreement. In the opinion of the workers, this happened because he wanted to sell the company’s secure market position and a good labour force to the joint venture company for - by Western standards - a ridiculously low price. As a result, the workers and trade unions attempted to find out from the Malev management whether they negotiated with any other poss ible partners, and on what basis they had opted for the US company; they also wanted to know how all this fitted in with Malev’s plans with regard to privatization, which were being discussed at that time. The trade union sent more than one letter to members of the government in connection with this m atter. For
instance, they wrote the following to the Transport Minister:
For the past 7-8 months we have heard all kinds of things about the future of our company. We have read seemingly contradictory inform ation serving various different interests. At the same time nobody has asked the collective of the company about any of these things. The collective has not even been asked what it thinks about the matter, or whether it has any suggestions to make.
Beside the issue of the establishment of a joint venture, disputes arose between the workforce and the management over the plan for privatization. The trade unions and management were united in their judgement on the need for privatization; however, they were divided on how its implementation should be realized.
The trade unions were strongly critical of the proposals which had been prepared for the economic policy makers in the government.