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issue: October 2004 APPLIANCE Magazine

European Report
The Challenge of Labor Costs


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By Paul Roggema, European correspondent, APPLIANCE magazine.

In Europe, most white goods manufacturing takes place in Germany and Italy. The latter have a reputation for value-for-money appliances, whereas the German companies are known for their premium products and brands.

Of course, premium does not come at a low cost: German labor costs are the third highest in the world, after Norway and Denmark, according to a recent report. German labor is a stunning 27.08 euros per hour (approx. U.S. $33.02), compared with 16.69 euros in Italy and 3.26 euros in Poland. With those kinds of figures, one can wonder how there is any mass production left in Germany. Still, many consumers (mostly in Northern Europe) are willing to pay for the high quality these workers provide (the label “Made in Germany” still sells). But lately, many German companies are feeling the pressure. Mercedes threatened to relocate production of the new C-class automobiles if no agreement could be reached on reducing labor costs, and Siemens decided to keep cell phone manufacturing in Germany only after reaching such an agreement. Companies are suggesting postponement of yearly raises, less overtime payments, and a return to the
40-hour workweek without extra payment.

So where does the white goods industry stand on this issue? Most seem to being dealing with it pretty well. Many of the main manufacturers (Electrolux, Whirlpool, BSH) have their operations located throughout Europe and can often relocate production between regions. For instance, the Eurowasher platform of BSH is currently produced in Spain, Germany (Berlin), Poland, and Turkey. Electrolux has the Italian Zanussi factories and German AEG operations, and Whirlpool Europe is located in Italy, but has the German Bauknecht factories, where the successful Duet washer is produced. Still, Electrolux closed a Swedish vacuum cleaner plant, and premium brand Miele opened a Czech factory for horizontal-axis top loader washers for the French market.

“The whole German white goods industry has been in talks with the central unions about ways to reduce costs,” notes Electrolux spokesperson Marija Borenius. “We took part in these meetings, but these meetings ended up with no results. Therefore, we are not planning longer work weeks at the moment.”

Regarding relocation, Ms. Borenius says that Electrolux has new factories in the pipeline, including a washing-machine factory in St. Petersburg, Russia and a washing-machine and a dishwasher factory in Central Europe, either in Hungary, Poland, or Romania. “The key objective for these factories is to provide Electrolux with the right capacities needed in the growing markets of Central and Eastern Europe,” Ms. Borenius explains. “In addition, there may be exports to other markets as well in order to provide us with a competitive offering at particular price points.”

 

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