Jackson Jambalaya

The Wall Street Journal reported how hard it is to actually close factories or layoff employees in Europe. Here is how crazy it is:

It took Whirlpool Corp.  eight months to close its 1,000-person factory in Fort Smith, Arkansas, last year amid falling sales. In Italy, the world's biggest appliance maker has been trying for three years to cut 500 jobs—with only partial success.

The contrast explains in part why Whirlpool's North American business profits are surging, while its European division is steeped in losses. During the downturn, U.S. companies managed to slash costs at home, and have sharply increased earnings there despite a tepid recovery in North America.

But in Europe, the same companies are still struggling to get their bloated businesses into shape, hobbled by rigid labor laws, high payroll costs and political sensitivities over job cuts amid double-digit unemployment levels.

Europe is "the slowest place in the world" for cost-cutting, Jeff Fettig, Whirlpool's chief executive, said in an interview last month. The continent has some of the world's highest manufacturing costs, and reducing capacity there "takes longer and costs more" than in the U.S. (KF note: Profits. That is how companies stay in business. If they lose money, they eventually go out of business and everyone loses his job. See Hostess.).....

With conditions in the euro zone tougher than expected, U.S. companies are finding the challenge of revamping their European businesses a big burden to earnings. Companies including Xerox Corp and International Business Machines Corp missed their first quarter financial forecasts because of their European divisions.

"Europe seems to be mired in molasses," Alexander "Sandy" Cutler, chief executive of Eaton Corp. said in April. Eaton, a maker of electrical and hydraulic parts, is benefiting from a rebound in U.S. housing, but is still suffering in Europe, particularly in its auto-parts business. A few months ago, Eaton expected the European auto market to decline 2% in 2013. Now it expects a drop of between 6% and 7%.

Union resistance has proved a primary obstacle. Caterpillar Inc. is trying to cut 1,400 jobs at a large plant in Belgium. The facility's operating costs are so high that it would cost the company less to import excavators and loaders than produce them there, the company said.

Ford Motor Co., F +2.22% which expects to lose $2 billion in Europe this year due to the severe downturn in car sales, plans to close three European factories by 2014. Both announcements sparked violent protests from unions and an outcry from government officials.

"It is our responsibility as a union to make sure workers don't lose everything overnight," says Anne Demelenne, secretary-general of the FGTB, one of the largest Belgian unions, which was involved in protests over the closures. "We're still better off than in other countries. Compared with the U.S., where workers can lose their jobs from one day to the next, in Belgium and Europe we are actually concerned about employees."....

The contrast between the restructuring of Whirlpool's North American and European businesses highlights the difficulties of the continuing euro-zone crisis.

The economic picture has been similarly grim: Overall sales of appliances have dropped about a quarter since 2007, as fewer people bought new homes and existing homeowners replaced dishwashers and ovens only when they break.

Meanwhile, prices of machines made by lower-cost competitors such as Turkish manufacturer Arçelik are as much as 70% lower than Whirlpool's in Europe. (Get that? Lower sales, competitors offer lower prices because they have lower costs.)

In the U.S., Whirlpool responded by closing plants and shedding more than 11,000 jobs since 2007. In the U.S., it typically took the company around a year to complete job cuts and shut factories.

Suppose a company does not want to layoff employees but makes adjustments to the market in order to preserve jobs? Tough luck.

In Europe, the same process takes two to three years. Whirlpool has taken three years, and counting, to cut about 4,000 jobs on the Continent.

In one Ohio plant, Whirlpool shifts easily from making front-load to top-load washing machines. The company can also shut assembly lines temporarily and add or subtract shifts to match sales. Whirlpool, which operated some facilities around the clock in 2007, is now running some with just one or two shifts only five days a week.

In Europe, where Whirlpool has eight factories, it took the company about two years to reach an agreement with German unions and officials to shift production of large washing machines to North America after attempts to make the factory more efficient failed.

In Italy, Whirlpool has been trying to cut 500 jobs by seeking to convince workers to move to other sites or accept early retirements. But three years later, Whirlpool has yet to achieve all of the planned cuts.

Even the smallest of changes are tough. For instance, Whirlpool cannot shift workers from making refrigerators to ovens because workers' contracts often forbid any change to their responsibilities.

Employees at Whirlpool's refrigerator factory near Siena work largely the same number of hours throughout the year, even though the company sells far more fridges and freezers in the spring than the winter. As a result, Whirlpool was holding excessive stock in the winter months that sat in warehouses until the peak season.

The company tried to convince employees in Siena to work more during peak times and less during quiet months. But after six months, Whirlpool only reached a partial agreement with unions to reallocate workers, leaving the company still producing too many machines during slack months.

One sign of the difference: Whirlpool's selling, general and administrative costs in North America last year were 7.3% of sales compared with 11.5% in its Europe, Middle East and Africa region.

"In the U.S., before even taking a decision on a big restructuring, you can pull other levers," says Esther Berrozpe, Whirlpool's European head. "But in Western Europe, it takes months of negotiation to even make small changes."

Italy recently changed labor laws in an effort to increase flexibility and address the problem of the country's loss of productivity over the last decade.

Mr. Barone, the Italian union leader, says labor contracts are gradually including new clauses giving companies more power to ramp workers' shifts to match sales.

But even as Whirlpool battles to push through the last round of job cuts, executives conceded they may not be enough...." Rest of article

This is what the UAW wants to do to Nissan. Remember this story the next time Dr. Marianne Hill extols the virtues of the corporate-union partnerships in Europe. Layoff's suck. Factory closings are tragic. No one likes to receive bad news. However, kicking the can down the road can make things much worse for the company.  If there is no company, then there are no jobs for anyone. A fundamental fact too many people seem to forget.