The collapse of the former Yugoslavia, and with it the old planned economy was a painful process for the workers. What happened at the famous Zastava car factory in Kragujevac during the past two decades of transition is a prime example. How was it privatized and sold off to FIAT? What is seldom heard in the Serbian media and why? Searching for answers to these questions, a member of the “Crvena Kritika” editorial board interviewed Zoran Mihajlović, the secretary of the Independent Union of Serbia at FAS (FIAT Automobiles Serbia).
Crvena Kritika: What were the conditions in Zastava/FAS before the nineties and how does the current way of functioning differ from it?
Zoran Mihailović: The Zastava Car Factory has a tradition of cooperation with FIAT, which dates back to around 1955-56, that is to say, it was then that the decision was made to expand the capacities of a weapons producing factory and create a new one to produce cars. We got into contact with FIAT at the time and, with the first machinery we received from them, started to produce the Fića, a slightly bigger version of FIAT’s Topolino. All subsequent products were similar to FIAT’s and compatible with them. So, we had a form of cooperation as early as then.
By 1988/89, we had had constant growth in production and sale of automobiles and in the record years the number of cars produced reached the annual figure of 200,000, which was significantly beneficial for the workers and also for the entire country. It was then that we started exporting to America, which later turned out as it did. This was our maximum level as a car producing factory, after which came the year 1990, when the crisis started, when the country fell apart and war broke out.
We lost a very important market in Yugoslavia, where we used to sell most of our goods, and with this we also lost our components producers, who were scattered all over our former country, for example Jugoplastika from Split, in Croatia, which stopped delivering parts as soon as the war broke out. In 1991 we had a drastic decrease in annual production, which fell from 200,000 to a mere 15,000. In addition, we had sanctions, new wars, bombing raids which damaged our factory several times, following which we took it on ourselves to rebuild it, and, by the end of the year 2000, we managed to put it under a roof, that is to say, to restore it to the state it was in during the nineties.
However, more significant investments in equipment and production were lacking and by 2000 we were in a situation where we had a factory which produced 15-year old models, and that was unequipped to make quality products. We also had no subcontractors, but were forced to seek new subcontracting companies, in order to obtain some parts, and those subcontractors were in an even worse shape. Even when we did have contact with them, we were unable to obtain quality products to build into our cars, so car production also decreased in quality until the time we were privatized. Before that, we were just trying to survive somehow.
When, in 2000, democratic changes had set in, we believed that things would change for the better overnight, but that, unfortunately, hasn’t happened. We were the first to come into conflict with the new government, the first to organize a six month long daily protest. Ministers came, trying to solve the problem, if you remember, Djelic, Vlahovic and labour minister at the time, Milovanovic. They were even beaten up at one point by the workers who tore down the gates and smashed the cars, revolted by the ministers trying to escape the factory.
After that some negotiations took place. It was a typical way to scam the workers. Then the factory with around 10,000 employees was reduced to some 4,500. Six thousand workers were transferred to a ZZO programme (Zastava Education and Employment, a company founded allegedly to prepare the laid off workers for re-employment, in reality a welfare programme). People were on paid leave, waiting to get some job, and all that was supposed to last for three or four years, until the factory was to be privatized and something new would be produced, after which the workers would get their jobs back.
That was the story they told us, but, unfortunately, it never happened. This ZZO, which was supposed to last four years, ended up lasting for seven years. We prolonged that, trying to buy time, to make sure those workers would get wages and survive those years somehow, but then the Ministry of the Economy, i.e. minister Dinkic, decided to stop financing this ZZO and people got severance pays in a day, left with no job whatsoever, while 4,500 workers were left in the factory.
However, the government’s job didn’t finished there; there was continuous pressure to reduce the number of workers, because these measures were having no effect, there was no production, no expected privatization, and no strategic partners. Every year, we were used and abused by the government in some kind of election campaign or something similar, as they kept bringing some people here, who allegedly were interested in buying the factory, while in reality they were some charlatans, who neither had the money nor the ability to run it..
CK: Just how big was Zastava’s debt, and who did they owe the money to? What happened with it?
Z.M: In 2006, when minister Bubalo was in charge of the economy, we decided to settle the debt to FIAT, which had lingered on since the 1980s, around 11,500,000 euros. We sold some property we used to own. Those were our servicing and sales houses around the country, some vacation resorts we used to own in Croatia and Macedonia. We settled our debt that way, and then got involved in talks about buying their equipment and starting putting together Puntos. We had invested around 14,000,000 euros in acquisition and installation of the equipment, that is to say, we paid that money to a partner company of FIAT that supplies their equipment.
Besides producing older models, we started assembling Puntos, and that lasted for about a year. Alongside that, we had signed a contract with Opel, which was supposed to be the same thing, the state was supposed to enable us to import a contingent of 5,000 cars, tax and customs free, to use that money to buy new equipment which would then make it possible for us to assemble Puntos and also the Opel Astra classic, and to decommission the old models, to gradually import new technology, so FIAT and Opel could later introduce another new model each, meaning we would have four new generation models, whilst slowly investing in the renewal of the factory, as there were no parties interested in buying the factory or investing in it at the time.
Then came May 2008, when at the peak of the election campaign, FIAT suddenly expressed interest in us, and we signed a preliminary contract about some technical collaboration. They arrived pompously, and this is used now by the ruling clique, at both state and local level alike. Everyone came to have their pictures taken, announcing FIAT’s arrival, big investments, the deal of the century and so on. For us in Zastava, who had just been trying to survive for 10 years, it naturally meant the end of the agony, because the situation dictated either closure or privatization, meaning we had to find a serious strategic partner. Of course, we bought the story hook, line and sinker, since they promised us two new models, annual production of 300,000 cars, and 10,000 jobs. We see, now, that not everything went as promised.
CK: What subsidies did the state give FIAT and its allied companies to get them to come to Serbia?
Z.M: The official contract was signed in September, but, sadly, hidden from the eyes of the public and far from the proclaimed idea of making everything transparent. As a union, we only saw the contracts 15 days after they had been signed and were bound by business secrecy to keep certain details secret, because revealing those details could even earn us prison sentences. It was obvious, however, that the State had given too many subsidies, that is to say, they favoured FIAT quite a lot and that, given the same conditions, any other company probably would have come here too. The State gave FIAT the opportunity to have a two-thirds ownership of the factory, to invest in the proportion of 1:3 and to export and import their merchandise in and out of Serbia free of customs duties.
In my opinion, they were mostly attracted by the trade agreement between Serbia and Russia, which allowed us to export to Russia, with token customs duties of 1%. They would thus be able to export to the Russian market, which is huge, and use our cheap labour force and cheap energy. FIAT would profit enormously, and the State would benefit only by providing jobs for a number of people and collecting a portion of the taxes.
However, the agreement with Russia stipulated that at least 2/3 of the raw materials built into a product had to be of Serbian origin, so the deal they planned turned out to be a fiasco since 90% of the things we assembled were imported from Italy, meaning the vehicle we constructed could not carry a Serbian brand, but was still an Italian vehicle.
They also got free infrastructure, they were freed from paying the land tax for the factory for 10 years. Even their component makers were granted the same conditions and I really think that FIAT and their partners couldn’t have got such conditions in any other country. FIAT was contract bound to hire initially a thousand workers, followed by another 1,400, once permanent production set in, meaning about 2,430 workers altogether. Also, if FIAT hired young people from the labour exchange, they would be free of any tax and social security requirements, their obligations taken over by the State.
This is how an atmosphere was created, in which every need of FIAT was met. Afterwards, in January 2009, production and the taking on of new workers were supposed to start, but that was halted due to the economic crisis. The investment of 200,000,000 euros which FIAT agreed to pay, which was due to arrive by the beginning of the year 2009 simply never came and the whole process was prolonged for about a year, leaving FIAT to work with the equipment we bought, which was simply given to them by our State, without any compensation whatsoever. The license under which we had to produce the Punto under the name Zastava 10, for which we had paid 1,500,000 euros, the State gave back to FIAT, also without any compensation whatsoever.
Basically, we gave them money; they came, took over our equipment, took over 1,000 workers, and so far have invested nothing. The 100,000,000 allegedly paid as the first part of the investment we have not seen so far and aren’t sure about what exactly they were invested in. The only visible thing is the factory building being renovated, i.e. roofs have been replaced, as well as floors and insulations in the factory halls; the old equipment has also been removed, but all that had been paid for by the Serbian State, while we are currently waiting for FIAT to install the new equipment, which is supposed to start sometime in May next year and last until October or November 2011, when test series production is planned.
CK: What was the testing of the 3,100 workers who had applied for work in FAS like and how did it go? How were the first 1,000 workers taken on?
Z.M: The workers had to take some test, like a driving license. It was rather problematic and stressful for the workers who had been doing that job for over 20 years, and were then quizzed to see whether or not they are able to continue doing it. People have been out of school for over 20 years, so asking a screw-driver worker, who finished elementary or secondary school more than 20 years ago, such questions as who was the first president of the USA, is, first of all, time consuming, second it ignores whether or not the person had ever looked into that, and it’s irrelevant for the job they perform. Also, there were mathematical questions, where workers had to convert dinars into euros and then euros into dollars, according to the selling or middle exchange rate, things usually done by economists, which are a bit problematic for a worker. There were also physics questions, about pouring fluids from one vessel to another, then adding and removing weights to reach a certain weight. Some tasks were simple and required simple logic, but some questions were so complex that even people who are, so to say, more educated, PhD’s and MA’s, had a hard time answering. Therefore the adequacy of the testing is also questionable. The hiring of workers that followed had little to do with the test results, because political parties influenced it a great deal, as they influence everything else. We hoped that FIAT would be immune to nepotism and political protectionism, but they, sadly, succumbed to it as everyone else has. For that reason, the testing left many workers doubtful.
CK: How sure is the production of new FIAT models to start in Serbia? Is there a possibility of another delay under the excuse that the crisis makes this moment unfavourable, and at the expense of the 1,600 workers waiting to be hired by FAS?
Z.M: You see, about that, I have always been a pessimist. Until I see equipment arriving and production in motion, I won’t be convinced that FIAT is here. Their people are there, walking around, doing things, acting like they own the place, but the problem is that they were supposed to begin installing infrastructure for 14 subcontractors at Korman Field by early November, as was planned. That hasn’t even started, nor is it clear as to when it will start because there is an issue with the owners of that land. Property relations haven’t been resolved, there are lawsuits, so the whole thing is rather behind schedule. On the other hand, the obligation the State took upon itself to finish the Kragujevac-Batocina motorway, in order to link the city of Kragujevac with the highway is also behind schedule. They were supposed to electrify the railroad, in order to ease supplying for the subcontractors, and to create a ring road, which wouldn’t go through the city. That hasn’t been started either. The construction season lasts from March to October, so we hardly expect them to start anything now, and if they start in March next year, it will be hard for them to finish by the end of the year, which brings the arrival of the subcontractors itself into question. That’s not good, because the factory itself isn’t hiring many people, only 2,400, which is not a solution for the city.
CK: How realistic are the statements that “One job in the car industry generates five to seven jobs, both directly involved in production and those involving services?
Z.M: These 14 subcontractors, upon arrival, would hire around 7-8,000 people and that’s the deal Kragujevac citizens expect. If the factory continues to merely assemble cars, without subcontractors, we have made it possible for the Italians to hire their 6-7,000 workers in Italy and to ship their merchandise here for us to put together. Under these circumstances, it could easily go like that, and I have approached on several occasions President Tadic, to solve that issue, so we could know where we stand and what to expect in the future. He promised to speak with Marchione [FIAT CEO] directly about it, but we still haven’t received an official reply.
The fact is that a lot of money has been invested and now the factory has the contours of a modern plant, which now only lacks modern equipment. If FIAT doesn’t come here at the end of the day, or decides to delay production, any other company that shows interest, would have very favourable conditions, because they would find new buildings with a trained and cheap work force, which makes this plant quite competitive. It’s very problematic that FIAT keeps delaying, inventing reasons not to finish the job, and they are the only ones who benefit from such a situation.
It is my opinion that, besides the economic crisis, the possibility of joining up with Chrysler also had something to do with it. Chrysler has always been Marchionne’s ambition, not just for the network and infrastructure, but also because of the opportunity to sell on the American market. He saw his opportunity in the fact that Chrysler had stopped producing big cars due to the crisis, and had switched to the production of more compact ones, the kind FIAT makes. That story is still going on and we are yet to see how it will turn out, but I think that FIAT is taking the same amount of money around, going a bit to Serbia, to Poland, to Russia, then back to Italy, and then back to America, using the 2-300,000,000 euros for show everywhere, without investing anything, just talking.
CK: How are shifts and breaks organized at the factory? What is the average salary at FAS?
Z.M: What the FIAT company is trying to pull off and what it did in Poland and in Italy at the factory in Pomigliano is rather problematic. As I’ve heard, there are also indications that this is being tried with the factory in Turin, Mirafiori and with the factory in Kragujevac, Serbia. They are attempting to introduce such working hours so as the workers would give up their right to a break, so that the break should be used at the end of a shift, so that we wouldn’t work 5 days a week, 8 hours a day, but 4 days 11-hours a day. This means a saving for them, but a worker could hardly endure that.
We had an announcement of a strike for the 18th October because FIAT refused to sign the collective agreement we’re negotiating at the moment. Secondly, ever since New Year’s Day when they took over the factory, the 1,000 workers that went over to FAS had been working only ten to fifteen days a month. For the rest of the month there is no work. The workers are on paid leave and receive 65% of their salary when not working. The sales of the Punto have fallen and salaries which were around 30,000 RSD now fell to some 23-24,000 RSD on average. The workers got very disgruntled with this, so, we announced a protest that is actually a warning strike. FIAT, however, declared that day a work-free day and thus evaded it.
After much negotiation we managed to force them to pay out some bonuses to the workers and to increase salaries by 10%, but I’ve been informed just recently that they did the cost accounting without taking any wage increase into consideration, so it is possible that we will schedule another strike, this one being the first strike at FAS. That would really hurt our government, because they depict FIAT as the best we have in Serbia, while in reality no one else but ourselves has the real picture of what precisely is going on there.
Whenever we say something even slightly bad about FIAT, it is never mentioned in the media. We have a total media blackout when it comes to bad news concerning FIAT, as if it were forbidden to the media - that is to the censors. Such a media blockade I had never seen even during the reign of Milosevic.
Since November we have been expecting problems with such practice, because the plan is that it should be working at full steam until April in order to build up stocks of products. In such a way products could be sold even during the summer in spite of production being stopped from May Day until November. As the introduction of new equipment is planned for that period, it won’t be possible to maintain production. Therefore I expect a problem of overtime work to arise, as well as working in shifts and everything that didn’t exist until now, but has already happened at other FIAT factories.
CK: There were instances of some workers wanting to leave FAS complaining about the pace of work being too fast, breaks too short and the attitude of the lower management disrespectful. How did the workers who went over to FAS put up with the new work speeds? Were there consequences for the workers who complained, but who in the end decided to stay at FAS?
Z.M: This involves a group of some fifty workers who had health problems. After the above mentioned testing took place, workers who got onto the short list had a medical examination. There was fear among the workers, everybody wanted to be accepted, no one wanted to be left out, so they concealed their illnesses and health problems from the doctors. For example, there was this worker, who was diabetic and yet he worked on the conveyor belt and, it being a tiresome job, he collapsed several times. He couldn’t endure such a pace. People with his and similar problems wanted to go back to Zastava. All of the 1,000 workers before being hired signed a contract which stated that they were on probation, and the Ministry of the Economy promised that if any of the workers for any reason could not stay after three months, they could return to Zastava without any sanctions. 5-10 people were expected to leave, but when a stampede of 50-60 people started, Dinkic said that was not going to happen so as to stop a potentially even larger group from deciding to leave FAS. After that, the majority of the workers somehow got talked into staying, some were even put under pressure, and around 10-15 workers who couldn’t stay because of health problems took the severance pay and left… There were no consequences for workers who complained.
CK: Were the workers pressured into accepting the Social Programme [redundancy] and leaving Zastava by any means?
Z.M: There were no pressures for the workers to accept the Social Programme. It was on a voluntary basis and it was mostly workers approaching retirement who took it. Only at the beginning of 2001, when the number of workers fell from 10,000 to 4,500, was some pressure being applied. There was also a sort of coercion in 2007, when the financing of the ZZO was axed and when Dinkic said “take it or leave it” about the severance pay.
CK: Has the debt to the Zastava workers been paid? Have they been receiving all their salaries for 2010 and are those regular?
Z.M: Everyone is getting regular salaries, but unfortunately they’ve been reduced, so, we made a deal involving rotation of work for the 1,600 workers on hold because they receive 65% of their salary. Workers work in these rotating shifts in jobs like cleaning the factory, raising the infrastructure and other auxiliary work, so they get some 80% and this is planned to last until the end of the year.
CK: Was that as a result of the protest and the negotiations in April and May of 2009?
Z.M: Yes. It had to be like that, because people have to live on something. It’s not their fault that FIAT postponed production, that deadlines are being prolonged, etc. We’re to have negotiations next month about organizing the payment of salaries for next year.
CK: What is the mood and opinion among the workers, taking into consideration that we know about FIAT’s blackmailing of Italian workers with threats of moving production of two new models elsewhere? Do the workers consider this justified or do they look upon it as a necessary evil considering the local job situation?
Z.M: The workers may be not be fully familiar with what is happening at the factories in Italy and in other countries. Our unions are informing them about events. The workers are, naturally, interested in keeping their jobs and livelihood, but they feel affected by the whole situation, especially the words of Marchionne who has said that production will be shifted to Serbia as a punishment for the “non-cooperation” of the Italian unions. I don’t think that this is fair. We don’t want to take away jobs from anyone. Our goal is to earn our salaries and to have a decent living from them, of course not at all costs, but we are not those who decided to move equipment and production.
The management of FIAT claims that in order for the factory in Mirafiori to survive it has to find a cheaper workforce, to survive on the market, to produce a competitive car which has a good price. Thus, most of the profit goes to Mirafiori. Nothing stays here. I think that at this moment our production isn’t something that could really endanger the Italian workers, especially taking into consideration the factories in Poland and Brazil where 600,000 cars are produced each year. We could become a problem only starting from 2012, when full production is scheduled to commence.
I think that the management of FIAT is using this sort of situation to attack the workers and their unions in Italy in order to “discipline” them and cut the privileges – if they can be called privileges – they had in the previous period. I think that this is extremely bad and a reason more for the unions to cooperate more closely. Last year I was in Turin for an international meeting of union representatives from all the FIAT factories throughout the world. There were people from Pomigliano, Spain, Turkey, Poland, Brazil, even representatives from Chrysler. At this meeting we attempted to organize a union network within which the transfer of information would be made more efficient, where it would be clear at any moment what steps FIAT is taking and what it is doing. I even suggested that whenever workers have a problem, wherever it may be, the rest of us should stop production in an act of solidarity in order to put pressure on all the countries for the problem to be solved.
However, whether they didn’t understand me well, or whether this was against someone’s interest, we just couldn’t agree at the time. They were all stunned after hearing my suggestion. It seems to me that they were confused by not seeing something like that coming at all.
I think that the Spaniards were on strike at the IVECO truck-production plant, and we had to come to an agreement about sending a letter of support from the meeting, but we couldn’t agree even on that. A representative from Sicily said that they had a problem as well, and that they needed support, to which I replied: “O.K. Let’s send them a telegram too. That can’t be that difficult…”
After that we went to Brussels to a meeting where we discussed what FIAT was planning to do. At the end of the year they are going to divide the automobile section from other production programs. The unions are afraid that a large number of workers will lose their jobs, that capital will be transferred from other sectors to the automobile one, and that the truck and agricultural machines sectors will be left down the drain, whereas the automobile industry will get the most of the funding.
This means loss of jobs for workers in the less profitable sectors and a fall in value of its stocks, but also of stocks owned by the workers. So, it was decided at the meeting that a joint letter should be sent to Marchionne, where the management of FIAT would be asked for a meeting, but the Italian unions came back from that meeting very dissatisfied. If I’m informed correctly, Italian unions signed a contract with FIAT in Mirafiori which is opposed by the other unions because it wasn’t agreed upon. Thus nothing of what we commonly agreed on has come out. We have to be on the same side in order to resist this. We can’t allow the bosses to keep putting apples of discord between us. Unfortunately, this is a slow process. Everybody is defending some of their own particular interests.
CK: How many workers are really needed to be hired in production to achieve the production level of 200,000 cars a year and at the same time honour the norm of an 8 -hour shift with regular breaks?
Z.M: That’s a relative thing. It depends on the level of automation of a factory. There’s the possibility that 200-300,000 cars a year can be produced with 2,500 workers and a high level of automation, that is with robotics and everything that replaces people. I know that around 4,500 workers at Mirafiori produce about 500,000 cars, or let’s say that the Swedish Volvo produces 500-600,000 cars with 4,500 workers, 2,500 of them working in production, the rest on the development of new models. That is what we don’t and aren’t going to have, we’re only going to assemble cars but we won’t have a development section where we could hire engineers and other non-production employees. Thus, 2,500 workers are quite sufficient with enough level of automation.
CK: What do you expect for the coming period at Zastava and FAS?
Z.M: I don’t think that everything will run as smoothly as has been talked about and I fear there will be more delays. Many things simply aren’t being done and are yet to be done, but I believe that in the end we’re going to have one quality factory for workers to work in. If we could choose we would probably not pick FIAT, but that’s how things are, what can one do...
CK: What do you have to say about the trade union struggles across Europe? In France, Greece?
Z.M: I think that globalization and the world economic crisis has created a conflict between the world of labour and the world of capital, where there is an attempt to take away rights workers have won so far. There was a disruption in the market, where there’s simply an excess of labour force, and they’re trying to cut wages, increase the age of retirement, to get more profit than they had before and to reduce workers’ rights.
We see how some laws are changed simply by a directive; it seems to me not from the EU, but from the American administration and the IMF. They dictate the working conditions in the EU. I think that this is not good for the workers and although these protests are happening, they don’t seem to be getting results. You take a million people onto the streets of France, yet the government still introduces what it had planned; hundreds of thousands on the streets of Greece, but again nothing came out of that. Here in Serbia too, you have some partial protests, a bushfire now and then, but there’s nothing at the same time and place, no coordinated action by workers to get some results. This way, we’re again going to see what happens in France. They announced one more protest against a law that had been already passed, one they didn’t manage to stop in the first place. In Greece also, laws have been passed that are rather restrictive relative to what they had before. I think that without coordinated action by the workers, it will be very difficult to resist this because without unity it’s hard to confront someone who has money and power.
CK: Do you have any idea of what should be done in Serbia? Maybe create a general union, one that would be the expression of the workers in Serbia?
Z.M: Well we organised an action concerning the proposed law about the PIO (Pension and Disability Insurance), and for the first time several unions joined forces. The law was changed a bit, but we don’t view the result as a great victory, but we managed at least to improve some things in that law. Any union can have its own policy, but I think that we ought to make a stand together when it’s about crucial laws and similar questions, as the upcoming new labour and strike laws are going to be, together with a series of laws that are surely going to threaten the world of labour, that is workers’ rights. Therefore this PIO law was only a test run. I think that there must be unity. Next year is going to be crucial and we expect strikes and workers’ discontent.
The privatization programme, carried out as it was, turned out to be a catastrophe. Tycoons bought factories and are now closing them and firing workers and I think this is simply going too far. If in a country with 6 million you have 700 thousand hungry people, below any means of existence; where you have 200 thousand people fired in just one year, then you have a country facing collapse. We simply survive with what someone sends from abroad, or from borrowing. We only spend but we produce nothing, and those that do produce are in the worst position.
In such a situation it will come to an explosion and it is possible that another 5th October [the date of the overthrow of Milosevic] will happen, or some revolution that won’t end like 5th October and I think that the government has become aware of this and it fears such a perspective.
(Interview by E.B.)
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