Krones promises jobs for life in return for flexibility

Related tags Krones Globalization

Krones the world's biggest manufacturer of beverage bottling lines
and packaging machinery, has signed a pact designed to secure and
upgrade the future of its facilities in Germany.

On 24 November 2004, the executive board and workforce representatives signed a path-breaking company agreement entitled "Employment - Success - Future"​ (abbreviated in German to "BEZ").

Under this scheme, the company is offering job security to more than 7,300 employees at its German plants, and pledges to keep these facilities operational up to 2010.

The company is also increasing its trainee numbers, and in the next few years will be investing around €110 million in upgrading and expanding the German facilities.

In return, the staff are accepting a capacity-driven, flexible working-hours arrangement, which not only covers high capacity utilisation periods but also permits a commercially necessary reaction to major capacity fluctuations. Hours worked above and beyond the arrangements already in place will be collected in a separate worktime account (BEZ time account), and paid separately as well.

The remuneration involved has fixed constituents and provides for variable special remuneration in dependence on the group's commercial success.

Krones​ believes that such flexibility is vita if the company is to be able to adapt quickly to demand swings and compete effectively in the global marketplace. The concept fits with the current drive towards achieving optimum production efficiency, and demonstrates on way in which Europe can maintain its production sector.

There had been fears that Krones would relocate jobs abroad to improve competitiveness, but this has now been ruled out. The company has an export ratio of 80 per cent, but aside from one site in China, which produces replacement parts for the Asian market, it manufactures solely in Germany.

One reason why staff and management have been able to reach such a landmark compromise is the condition of the German economy. Although it remains the biggest in the 12-country euro zone, it nearly came to a standstill in the third quarter as exports, previously the main driving force behind growth, slumped on the back of slowing global growth.

German gross domestic product (GDP) grew by a meagre 0.1 per cent in the period from July to September, the federal statistics office Destatis calculated, much slower than the growth of 0.4 per cent seen in both of the preceding two quarters.

The 0.1 per cent increase was in fact the slowest rate of growth of the German economy since the second quarter of 2003, the final quarter of the last recession.

But Krones, which claims that its expertise lies in Germany, is confident that this highly flexible new scheme, scheduled to come into force on 1 January 2005, will create a crucial precondition for meeting and mastering the future challenges of globalised competition while retaining its German facilities as well.

Indeed, the group is confident that it is well placed to survive the current difficult market conditions. As the world's largest manufacturer of beverage filling and packaging machinery, it achieved an increase in order bookings of 12 per cent on a like-for-like basis for the first nine months of 2004.

From January to September 2004, the Krones Group achieved sales revenues amounting to €1.1 billion, a rise of 5 per cent. Orders were up by 13 per cent at €704 million on 30 September 2004, which the company is believes suggests sound prospects for further growth in 2005.

The group's goal for 2005 is to enhance productivity still further by improving its processes and cutting costs relative to sales. Krones believes that flexibilising and increasing the weekly working hours of Krones' staff will make a significant contribution to this.

Related topics Processing & packaging

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