Fagor Updates

It’s been a rough couple of weeks in European co-op news.

One key story – besides the Co-operative Bank restructuring about which I wrote Monday – is that Fagor Electrodomesticos, a core Mondragon industrial cooperative, has entered a sort of preliminary bankruptcy protection called preconcurso. What I’ve learned so far suggests that although this is unlikely to cause serious damage to the Mondragon Cooperative Corporation as a whole, it is likely to be a painful adjustment for one of Spain’s largest enterprises and a pillar of the Basque economy.

Basque public broadcaster EiTB continues to crank out the coverage, and I’ve also discovered that the Mondragon Corporation news site TU Lankide has provided its own reporting (although only one article has appeared in English so far, essentially the initial 10/23 press release affirming MCC’s commitment to the cooperative model). There’s no shortage of writing about this major development, but I’m so far unable to find much of anything in English.

These two outlets have published quite a bit in Spanish, so I would love to collaborate with anyone fluent in Spanish (or Basque) in order to better understand what is happening, especially regarding verification of text automatically translated. Please email me at coopgeek (at gmail) if you are interested.

I want to significantly disclaim everything that I’m reporting here. I’m currently seeking a contact in the Basque Country to help clarify and confirm what I seem to be reading, but for now my readers should take my overview with a large grain of salt.

And on that note, I must clarify my earlier report of a goal of saving only 1,000 Fagor jobs. I’m now finding statements that converge upon the goal of maintaining 1,000 jobs in a streamlined and profitable Fagor. Most notably, Fagor issued a statement Tuesday expressing its commitment to its obligations to creditors and its intention to move back toward profitability. The new employment office is apparently focused on relocating the members who can’t be fit into a sustainable Fagor, apparently out of a total of 2,000 employees in the Basque Country (with another 3,600 working at plants in 20 countries, who I believe are mostly non-members and therefore lower priority).

In a Monday interview with EiTB’s show 60 Minutos, Fagor Director General Sergio Treviño expressed confidence that 1,000 workers could be relocated. And a statement from the Department of Social Management also suggests the intention of 1,000 jobs being maintained in Fagor’s traditional lines of work; this was also reported by EiTB.

Of course, these are all goals, and we might see a wide range of results depending on how negotiations with creditors play out over the next four months.

Update 10/31: The MCC General Council has unanimously decided to reject the feasibility plan put forward by Fagor, which appears to mean they will not bail out the company; this makes bankruptcy much more likely.

One key issue I see is whether this crisis at Fagor (which is serious but localized) becomes systemic in the cooperative economy of more than 100 cooperatives and nearly 300 firms in all. So far it is pretty limited, and even other “Fagor” companies within Mondragon are doing fine; for example a Colorado-based firm has issued a press release noting that its parter Fagor Automation is in good shape.

One spot where this threat seems likely to manifest is in MCC’s internal social security system, which will be dealing with a wave of early retirements. TU Lankide published an interview with the head of Lagun Aro EPSV (a voluntary social welfare entity), who acknowledges that this restructuring is a serious challenge but expects the cooperatives to pull through in the same way they weathered a crisis in 1992-3.

Despite the apparent stability of MCC as a whole, it appears that some elements of the Basque government are interested in an increased state role, perhaps an “intervention” or “conversion.” However, the presidency seems to be more interested in a supporting role rather than serving as the “locomotive.” Presumably there are a lot of opinions about the proper role of government, much in the way the US hotly debated what to do with General Motors (although this is different because GM didn’t have a larger system of support like MCC).

In any case, this is a pivotal moment and time for reflection. Jose Maria Ormaetxea – one of the original founders of the co-op that became Fagor and spawned the “Mondragon Cooperative Experience” – has called attention back to the thoughts of Father Jose Maria Arizmendiarrieta (appropriately enough). He recalled that Father Arizmendi’s last words written were “aurrera beti,” which (I believe) can be translated from Basque as “always go forward.” Ormaetxea reminds us that, as Arizmendi incessantly repeated, “The sign of vitality is not to last, but to be reborn and adapt.”

I love that the Mondragon cooperators are taking this difficult opportunity to hear from one of the few surviving pioneers who learned from Father Arizmendi. But even if we ignore Arizmendi’s role as the midwife of Mondragon’s cooperative economy, these are obviously words of wisdom. Fagor cannot go back to where it was before, so it might be healthy to recognize that the mother tree is falling to make room for all the new seedlings that have sprung up.

To its credit, MCC’s leadership seems to have recognized this; the test ahead will be how well it holds on to the cooperative values that it now proclaims in its moment of unprecedented crisis.

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