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Intercooperation, flexicurity and their
impact on workers: the case of Fagor
Electrodomésticos
JOSU SANTOS-LARRAZABAL and IMANOL BASTERRETXEA
University of the Basque Country, UPV/EHU, Spain
This is an electronic version of the accepted paper in the journal Annals of Public and
Cooperative Economics.
It is open access under the terms of the Creative Commons Attribution-NonCommercial
License, which permits use, distribution and reproduction in any medium, provided the
original work is properly cited and is not used for commercial purposes.
© 2021 The Authors. Annals of Public and Cooperative Economics published by John
Wiley & Sons Ltd on behalf of Edgard Milhaud Foundation.
Please, cite this article as:
Santos-Larrazabal, J. & Basterretxea, I. Intercooperation, flexicurity and their impact on
workers: The case of Fagor Electrodomésticos. Ann Public Coop Econ. 2021;1–29.
https://doi.org/10.1111/apce.12329
The final published paper is open access available at:
https://onlinelibrary.wiley.com/doi/full/10.1111/apce.12329
1
Abstract
Mondragon cooperatives have used flexible employment, training and labour protection
policies to deal with economic crises since the 1970s. These policies were also used in
2013 to alleviate the social consequences of the demise of their biggest industrial
cooperative, Fagor Electrodomésticos. This article aims to analyse – through 40
interviews with different stakeholders – the advantages and limitations of wage, working
time and functional flexibility policies by framing them under the flexicurity concept. In
contrast with previous research on Mondragon cooperatives, this study has found a
strong worker-owner resistance to flexicurity policies, mainly before the firm’s
bankruptcy. The study has also found the main reasons for worker resistance and for
some successful Mondragon cooperatives’ reluctance to offer permanent relocations to
redundant Fagor Electrodomésticos’ members. This research will help cooperatives to
maintain and improve their flexicurity policies and their resilience. Some findings can be
extrapolated to the growing number of firms that aim to implement flexicurity policies
without harming their workers’ social welfare.
Keywords:
Mondragon, flexicurity,worker-owned firms
Article type: Research paper
JEL codes: M12, M14, M50
INTRODUCTION
The bankruptcy of Fagor Electrodomésticos (FED) in 2013 and the responses that
Mondragon Corporation has given to its redundant worker-members have been a critical
test of stress and validity of flexicurity policies. These policies are based on the trade-
off between employment security for its members and several forms of labour flexibility
(Wilthagen & Tros, 2004). Mondragon’s worker-owners have traditionally voted to
reduce their own wages, have approved the adjustment of their working hours or
schedules to meet their firms’ needs, and have shown high levels of functional
flexibility (e.g., Logan, 1988; Cheney, 1999; Bakaikoa et al., 2004). Functional
flexibility in Mondragon cooperatives implies not only transferring employees to
different activities and tasks within each firm but also relocating worker-owners of
cooperatives in crisis to those in need of a workforce (Basterretxea & Albizu, 2010).
The literature tends to represent these flexicurity policies as a source of competitive
advantage and an element that has allowed Mondragon’s cooperatives to adapt to
market fluctuations and manage crises relatively successfully (Bradley & Gelb, 1987;
Logan, 1988; Whyte & Whyte, 1988; Albizu & Basterretxea, 1998; Ormaechea, 1998;
Smith, 2001; Clamp, 2003; Basterretxea & Albizu, 2010; Elortza et al., 2012; Landeta et
al., 2016; Errasti et al., 2017; Arando & Arenaza, 2018). Although these studies have
enrichingly and faithfully analysed the Mondragon policies, they do not seem to have
delved into the negative effects of wage reduction, working time flexibility and
functional flexibility on worker-owners’ wellbeing and satisfaction. Excluding a few
which have referred to Mondragon worker-owners’ refusal to relocate to cooperatives
far from their homes in the 1980s (e.g., Cheney, 1999; Clamp, 2003), previous studies
have neither analysed any possible worker-owner resistance to those measures nor the
2
possible resistance of successful cooperatives to help and relocate worker-owners of
unsuccessful ones. An often-idyllic situation has conversely been presented, in which
cooperatives ‘can relocate [their] members rapidly and with a low level of friction
among different activities and tasks’ (Albizu & Basterretxea, 1998).
Previous research on flexicurity measures in Mondragon has mainly considered
managers’ opinions, overlooking important distortions, such as their social desirability
bias (Heras-Saizarbitoria, 2014). Many previous researchers have also presumed that
there is an equivalence between Mondragon Corporation’s formal flexicurity policy and
its day‐to‐day internalisation in its cooperatives. While Mondragon defines and fosters
flexicurity policies, the corporation has insufficient power to impose them on its 98
cooperatives. The way these policies are thus implemented in each cooperative differs
significantly, usually after lengthy negotiations between the corporation and its
cooperatives. This decoupling of practices from formally adopted policies, which has
been broadly analysed from a neo-institutionalist perspective in Heras-Saizarbitoria’s
(2014) research, can also occur because of worker resistance. The present research will
add light to conflicts cooperatives face when applying flexicurity policies, their causes
and manifestations.
Recent research points to wage reductions and relocations as factors that could partially
explain poor responses in satisfaction surveys and increasing levels of absenteeism in
some big Mondragon cooperatives (Basterretxea & Storey, 2018; Basterretxea et al.,
2019), thus a nuanced analysis of Mondragon flexicurity strategy is required.
The adoption of flexicurity policies as a strategy by the European Union and the
increase in studies addressing it (Bender & Theodossiou, 2018; Bredgaard & Madsen,
2018; Bekker & Mailand, 2019) reflect the fact that these policies are becoming more
common in a greater number of companies. Some studies also stress that how
flexicurity policies are implemented in certain countries, particularly in Southern
Europe, leads to increased labour market precariousness (Domínguez, 2012; Fernández-
Rodríguez et al., 2012; Gialis et al., 2014; Gialis & Taylor, 2016). This study aims to
benefit the companies interested in implementing flexicurity, whether they are
cooperatives or not, so that its implementation is cost-effective and has minimal social
impact.
Taking these gaps into consideration, this article aims to contribute to the literature in
three ways. First, it aims to contribute to the growing flexicurity literature by analysing
the case of a firm and a corporation that have adopted flexicurity policies for more than
four decades – even before the term flexicurity was invented. Second, it contributes to
the study of the resilience of worker-owned organisations and considers both the
managerial and worker-owner perspectives in specific circumstances arising from
FED’s crisis and bankruptcy. Third, this article contributes to field of labour geography
that explores how labour can shape labour markets, either proactively or through its
reaction to the growing precariousness and flexibilisation of work.
This paper’s main objective is to analyse the lights and shadows of flexicurity policies,
based on the case of FED. The aims are (1) to contrast the validity of academic studies
that attribute competitive advantages to flexicurity and (2) to analyse its limitations in
social matters, shedding light on different agents’ resistance to flexicurity and their
strategies to avoid it.
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The paper is organised as follows. The next section offers a brief profile of the case-
studied organisation and a review of the literature related to understanding flexicurity
policies in Mondragon cooperatives. This is followed by an outline of the research
methods and then a summary of the fieldwork results. The final section is devoted to
discussion and conclusions.
CASE STUDY CONTEXT
In 1956 five former students from a technical college in Mondragon created FED to
produce heating devices and subsequently other home appliances. Three decades of
internal growth made FED Mondragon’s biggest industrial cooperative and Spanish
leader in the white goods industry. In 1989 it began a process of external acquisitions
with the takeover of Spanish and European competitors. The biggest acquisitions were
those of the Polish firm Wrozamet in 1999 and the French competitor Brandt in 2005 –
a company as big as FED itself. In 2006 these acquisitions made FED Europe’s fifth
largest firm in the white goods sector, employing a total workforce of 10,543. The
opportunity to become cooperative members was not given to the workers of its 10
production plants based in six foreign countries.
FED financed its growth strategy through borrowing; and despite the growth of its main
markets in the 1996–2007 period, it operated with razor thin margins. When the demand
for home appliances in its main markets collapsed in 2008, the company entered a sharp
decline that ended in bankruptcy proceedings in November 2013. For a deeper historical
review and a broader understanding of the reasons that generated FED’s demise, see, for
example, Molina (2012), Errasti et al. (2016), Arando & Arenaza (2018) and
Basterretxea et al. (2019, 2020).
FED was part of the Mondragon Group – this group is comprised of close to 264 firms,
98 of which are cooperatives and have 81,507 employees and a total revenue of 12,229
million euro (Mondragon, 2020). Power, authority and ownership in Mondragon are
decentralised in a federal or inverted pyramid organisational structure (Basterretxea et
al., 2020). This inverted pyramid structure of autonomous cooperatives that cooperate
voluntarily has an impact on how flexicurity policies are implemented.
Mondragon created Lagun Aro in 1958, which is a social welfare system for cooperative
worker-owners. The 26,759 Mondragon cooperative worker-owners are registered in the
Spanish National Social Security System as self-employed workers, which means they
do not pay social security contributions for unemployment insurance, nor do they
receive social security unemployment benefits if they lose their jobs. In order to cope
with the unemployment risk, Mondragon cooperatives pay fees into Lagun Aro. These
fees are then used to pay unemployment benefits, to provide training to redundant
worker-owners, to pay early retirement benefits to worker-members over 55 who are
difficult to relocate due to poor training, and to reward and encourage cooperatives to
relocate workers of over-staffed cooperatives.
Literature on flexicurity and flexicurity measures in Mondragon
cooperatives
The main idea behind flexicurity is that labour flexibility and employment security
should be mutually supportive and maintain a number of trade-offs, which involve
individual workers, groups of workers or entire workforces, business sectors or national
4
governance systems (Wilthagen & Tros, 2004; Bredgaard et al., 2005; Gialis et al.,
2014).
This research follows the three flexicurity dimensions framed in Madsen’s (2004)
golden triangle. To delimit the concept of flexible contractual arrangements of
flexicurity (first dimension), this study relies on Casey et al.’s (1999) fourfold
definition, which states that labour flexibility can be dimensioned in numerical,
functional, financial and temporal terms. Regarding security, the flexicurity approach
advocates a modern social security system and unemployment benefits that guarantee
income (second dimension); and active labour market policies (third dimension), such
as lifelong learning strategies, that ensure employability and reduce unemployment
periods by facilitating the redistribution of unemployed workers (Domínguez, 2012).
After appearing unintentionally in Denmark as a set of social commitments between
labour market actors and the political system, flexicurity was implemented into German
law in 1999 to benefit the most disadvantaged sectors. In 2000 it was incorporated into
the European Employment Strategy, within the Lisbon Agenda for growth and jobs
(Wilthagen & Tros, 2004). Since 2008 many governments, guided by the European
Commission’s (2008) ‘mission for flexicurity’, have adopted flexicurity policies (Gialis
et al., 2014; Gialis & Taylor, 2016).
Southern European countries do not meet the institutional, political, socio-productive
and welfare conditions of the countries where flexicurity originated. Thus, their
implementation of flexicurity policies breaks the proportionality principle between
flexibility and security (Fernández-Rodríguez et al., 2012; Gialis et al., 2014; López et
al., 2014; Gialis & Taylor, 2016). In these countries flexibility has overwhelmed the
concept of security (Domínguez, 2012), and they are now interchangeable terms
(Fernández-Rodríguez et al., 2012).
Among the negative impacts of flexicurity in Southern European countries, researchers
consider that it increases temporariness (Domínguez, 2012), leads to the
individualisation of labour protection and increases inequality (Harvey, 2006; Keune &
Jepsen, 2007; López et al., 2014; Gialis & Taylor, 2016).
The different flexicurity dimensions have been used by Mondragon cooperatives in
different crises. This study presents them individually with their theoretical advantages
and limitations.
Numerical Flexibility
Mondragon is permitted to have up to 25% of wage labourers in its 98 cooperatives.
These firms have grown internationally since the early 1990s without offering employee
ownership to employees in subsidiaries (see Mendizabal et al., 2005; Errasti, 2015).
Therefore, only 26,759 of the 81,837 Mondragon employees in 2018 were worker-
owners. The remaining 67.3% were wage labourers with no ownership rights.
When the 2008 crisis occurred, Mondragon cooperatives initially reduced the number of
employees in subsidiaries, selling some subsidiaries and firing – or not renewing the
contracts of – many temporary workers in the parent cooperatives (Errasti et al., 2016).
Sometimes even successful cooperatives fire or do not renew temporary worker
contracts in order to relocate redundant worker-members of other Mondragon
5
cooperatives (Smith, 2001). Annual reports of Mondragon and its social welfare
protection system Lagun Aro offer data on the role of external numerical flexibility for
the 2007–2015 crisis period. Mondragon reached its employment peak in 2007 with
103,731 employees (Mondragon, 2008) and between 2007 and 2015 this number was
reduced by almost 30% to a total of 74,335 employees (Mondragon, 2015). In the same
period the number of worker-owners was reduced much less, by 8.1% (Lagun Aro,
2007, 2015), mainly by not replacing retired older members.
With the exception of Kasmir (2016), most of the Mondragon literature overlooks the
role of external numerical flexibility (e.g., Albizu & Basterretxea, 1998; Arando &
Arenaza, 2018). When presenting other kinds of labour flexibility – such as functional
flexibility, relocations or working time flexibility – researchers also overlook that these
types of labour flexibility often involve making many non-members redundant.
Functional Flexibility and Relocations
Functional labour flexibility is a firm’s capacity to employ multi-skilled workers that
can fill different positions when needed (Albizu & Basterretxea, 1998). The statutory
right to work in Mondragon cooperatives is exercised by considering that a member’s
main right is the right to employment, while adjusting it to a member’s professional
competence becomes a subsidiary right (Basterretxea & Albizu, 2010). As a result, each
cooperative may internally apply functional mobility of its members in emergency
situations or for technological or economic reasons (Albizu & Basterretxea, 1998).
A common solution among cooperatives in the same geographical area or division is the
geographical mobility of members from overstaffed cooperatives to others in need of
staff, through temporary relocations. Only when the unemployment situation of a
cooperative with an excess workforce is irreversible, does Mondragon favour turning
temporary relocations into permanent ones (Basterretxea & Albizu, 2010). Functional
flexibility and relocations are profusely applied even in times of economic prosperity,
thus balancing cooperatives’ different staff needs (Smith, 2001; Errasti, 2015; Errasti et
al., 2017).
Broader research on functional flexibility and relocations (Martin et al., 2000;
Mendenhall et al., 2002; Mignonac, 2002; Sikora et al., 2004; van Dam, 2005)
highlights that those processes can generate negative attitudinal responses in employees.
The uncertainty particularly created by relocations is highly stressful and creates anxiety
(Riemer, 2000) because they can lead to unwanted job changes, a need for retraining,
being a greater distance from home or to a change in work environment and roles
(Matthiesen, 2005). On the other hand, functional flexibility is often linked to higher
satisfaction, mainly when it is combined with job training and job enrichment (Origo &
Pagani, 2008). Nevertheless, the literature also considers that functional flexibility can
cause emotional burnout, especially in situations of high demand for work or inadequate
information (Goudswaard, 2003).
Financial or Wage Flexibility
In Mondragon the wage policy is subordinate to employment creation and business
profitability. In times of crisis, cooperative firms frequently reduce their members’
wages by 10%, 20% or even 30% in critical cases (Basterretxea & Albizu, 2010). In the
crises of the 1970s, 80s and 90s, this wage flexibility offered a competitive advantage
6
against its Spanish non-cooperative competitors, see, for example, Bradley & Gelb
(1987) or Logan (1988).
Most studies cited on Mondragon’s employment policy tend to remark on the positive
effects of wage flexibility on competitiveness (e.g., Elortza et al., 2012; Landeta et al.,
2016), largely overlooking the possible negative effects on members’ attitudes and
behaviours. They also stress that worker-members are the ones that vote in their
cooperative’s general assembly to reduce their salaries, something that is considered as
a clear sign of commitment (Logan, 1988; Cheney, 1999). Salary reductions in
cooperatives are easier, researchers argue, since the employer–employee agency
relationship is eliminated, therefore avoiding the risk of the principal’s opportunism and
allowing an internalisation process of workers’ objectives into the objective function of
a firm (Navarra & Tortia, 2014). The cited scholarly literature focused on Mondragon
tends to overlook that the decision and discussion processes of cooperatives voting to
reduce their members’ salaries are often painful and conflictual (Basterretxea et al.,
2020). Some recent studies point to wage flexibility as a factor to explain lower
satisfaction and higher sick absence rates among worker-owners than among employees
without ownership in some large Mondragon cooperatives such as Eroski (Basterretxea
& Storey, 2018) and FED (Basterretxea et al., 2019).
Temporal Flexibility
Flexibilisation of work schedules is a generalised measure adopted by Mondragon
cooperatives when their activity decreases in times of crisis (Basterretxea & Albizu,
2010). According to the Displaced and Mobile Work Schedule Regulation (Mondragon,
1998), the cooperative manager – after informing the Social Council (SC) and the
workers, and with the approval of the Governing Council (GC) – may reduce working
hours or the number of working days per week for its members. In the case of FED,
non-worked hours could be accumulated for a maximum of one year. There was an
obligation to make up the hours if there was an increase in activity in the following year,
with a maximum of 10 working hours per day. If after that time those hours were not
made up, Lagun Aro assumed them as unemployment hours. Together with external
numerical flexibility, this is cooperatives’ first resort strategy in a demand crisis
(Basterretxea & Albizu, 2010).
Some Mondragon cooperatives, instead of reducing working hours in times of crisis, opt
to increase worker-owners’ working hours without increasing their salary (solidary
overtime), thus reducing the need for temporary workers. For example, the retailer
Eroski approved to increase working hours of its almost 9,000 worker-owners by 10%
in 2009 (Basterretxea & Storey, 2018).
While researchers on Mondragon seem to overlook the possible negative effects of
working time flexibility, the following broader literature considers them. When
voluntary, working time flexibility helps job satisfaction and mental health (Gregory &
Milner, 2009). However, this flexibility guided by market needs (Hildebrandt, 2006),
together with the risks associated with overtime, disruption of family and social life
(Golden, 2015), and intensification of work (Gregory & Milner, 2009) and stress, leads
to a negative work–life balance (White et al., 2003). Nevertheless, the Displaced and
Mobile Work Schedule Regulation (Mondragon, 1998), to which this study’s authors
had access, highlights the advantages that this model provides, not only in times of
7
crisis, but also in coping with peaks in demand or seasonal demands, such as those in
the fridges unit.
As can be seen, labour flexibility measures can lead to employee disruption due to a
firm’s perceived breach of contract (Rousseau, 1995). This may reduce their
commitment (Black & Lynch, 2004); increase their turnover, absenteeism and
performance problems (Basterretxea et al., 2019); or provoke a defeatist attitude toward
work and a greater desire to leave their job (van Dam, 2003). Moreover, the
disappearance of work routines due to labour flexibility leads to psychological, physical
and social disruption (Brett et al., 1992).
As Origo & Pagani (2008) underline, the impact of different forms of flexible work
arrangement on job satisfaction heavily depends on whether they are freely chosen by a
worker or whether they are imposed by employers or by contextual factors. As in many
other cooperatives (see, for example, Smith (2001) about La Lega, or Ugarte et al.
(2009) about Irizar), flexible work arrangements in Mondragon are decided by worker-
members; however, these arrangements are mainly influenced by adverse economic
conditions. Mixed effects on partners’ attitudes and behaviours are thus expected to be
found.
Social Security System and Unemployment Benefits
Firms can achieve flexibility without detrimental effects on workers’ satisfaction if
policies aimed at favouring the use of flexible contracts are coupled with policies aimed
at enhancing employment stability (Origo & Pagani, 2009).
Offering employment security to employees increases their commitment, satisfaction,
wellbeing and health (Tsui et al., 1997); leads to a better acceptance of relocations and
functional flexibility (Ostroff & Clark, 2001); and to an improvement in both their work
performance and (indirectly) to company productivity (Freeman, 1978). Unemployment
benefits are among the measures to increase workers’ perceived job security (Green,
2009). Providing workers with a long-term employment perspective increases their
willingness to invest their time and effort in a firm (Hashimoto, 1981).
Since the creation of Lagun Aro, cooperative worker-owners have achieved very high
levels of employment security in exchange for their acceptance of labour flexibility.
Several researches confirm that employment security is the single most important
satisfaction factor for Mondragon cooperatives’ partners (Heras-Saizarbitoria, 2014).
Active Labour Market Policies and Lifelong Learning
Functional flexibility required in each cooperative and the relocations among
cooperatives both demand a high level of multi-skilled capability from members
(Landeta et al., 2016). These members are forced to switch to new tasks as well as to
new companies and, sometimes, even to a new business sector; so adaptation is easier
when members have gone through solid generic training (Basterretxea & Albizu, 2010).
Of the relocations that occurred in the 1980s and early 1990s, mainly workers who had
obtained at least second cycle qualifications from vocational training schools were able
to become permanently relocated; therefore, Mondragon promoted extensive vocational
training programmes to facilitate relocations of members with primary education
(Basterretxea & Albizu, 2010; Landeta et al., 2016).
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In the case of FED, functional flexibility and relocations have been implemented
without adequate training support, as can be seen from the fact that a large portion of
FED’s workforce had no vocational training (Basterretxea et al., 2019). This raises the
question of whether it can be called functional flexibility, or whether it should be
considered a poor version of it; this question is further discussed in the discussion and
conclusions section.
METHODS
Due to the subject’s complexity, this paper has adopted an exploratory qualitative
methodology (Glesne, 2006), like that of the contemporary case study. The study’s
nature is holistic, instrumental, exploratory and explanatory.
The quantitative information was extracted from a large amount of longitudinal, internal
and public data, close to FED’s closing period. The most relevant public information
was analysed, coming from journalistic and academic articles as well as Lagun Aro
(2007–2019) and Mondragon (2008, 2015, 2020) annual reports. Internal corporate FED
and Mondragon management reports and regulations were also compiled, for example,
the Absenteeism Report of 2005 (Fagor Electrodomésticos, 2006) or the Displaced and
Mobile Work Schedule Regulation (Mondragon, 1998).
The qualitative data was obtained from field work based on 40 in-depth interviews with
a representative and reliable pool of FED internal and external stakeholders during its
fall and in the relocation stage. Theoretical, purposive and snowball sampling (Patton,
2002), in addition to the recommendation of or allusion to the interviewees, were used
to define the sample. Unlike other research that has focused solely on a manager's
opinion, these interviews included contributions from 20 former senior FED managers
(3 GC representatives and 2 SC members); 13 worker-owners (4 leading SC
representatives and 6 members of platforms of those affected by FED’s closure); a
senior union official who supported non-owner workers through the collapse; 3 senior
managers from Mondragon headquarters; 4 senior Basque Government officials
responsible for industrial policy; and a researcher from Mondragon University. This
increases the richness and reliability of the information collected (Miles et al., 2014),
covering the various interests at stake (Glesne, 2006).
A semi-structured script was developed based on the conceptual framework studied, and
it was modified as the field work progressed (Denzin & Lincoln, 2008). To obtain more
feedback from the interviewees, key quantitative data and input from previous
interviewees were presented to them. The interviews lasted between 90 and 170 minutes
and were recorded and transcribed verbatim. The study’s uniquely academic motivation,
the diversity among the interviewees and their anonymity were guaranteed, thus
avoiding the participants’ organisational silence (Morrison & Milliken, 2000) and social
desirability (Nederhof, 1985). Possible methodological biases related to the catharsis
involved for the interviewee to deal with a traumatic experience were considered
(Heras-Saizarbitoria, 2014). The data collection from the fieldwork ceased at the
theoretical saturation point, when the marginal contribution of each interview began to
decrease (Miles et al., 2014).
The diversity of information sources guarantees the factors’ validity and led to
contextualisation and interpretation of the case through abductive reasoning, with an
interactive compromise between empirical material and theory (Sinkovics & Alfoldi,
9
2012). The information was triangulated and analysed as suggested in the literature
(Miles et al., 2014), through an iterative process of categorisation, interpretation,
discussion and explanation (Glesne, 2006). An inductive analytical approach was used
with great potential for qualitative content analysis of the collected data (Glaser &
Strauss, 2017). Key findings were synthesised and representative passages and
quantitative descriptive figures were included to better illustrate the object of study.
Internal validity is ensured by shared patterns explaining the event. As recommended in
the literature (Gibbert et al., 2008), in order to increase the reliability of the study’s
analysis of the interviews, one peer (who was not a co-author of the paper)
independently analysed the interview transcripts and discussed and reviewed the draft
paper. With the same purpose in mind, a draft review was also made by a key informant
in April 2020.
RESULTS
In the following sections the advantages and limitations that flexicurity has had in
dealing with the management of the surplus of FED partners are addressed. The results
are divided into the pre (2005–2013) and post (2014–2019) FED closing stages.
Flexicurity before FED closure
Numerical Flexibility
External numerical flexibility differed according to the different categories of workers
employed by FED.
FED reached its worker-owners peak in 2004 with 3,520 members. Between 2004 and
2013 this number was reduced by almost 50% to a total of 1,895 members (Basterretxea
et al., 2019). This reduction was achieved mainly through not replacing retired members
and promoting early retirement. Since 2010 the early retirement age decreased from 61
to 58. Many interviewees consider early retirement as a precarious measure. Lagun Aro
offers 80% of the salary to those members affected by early retirement. Given that
salaries were cut by 20% in the years leading up to the firm’s closure, members who
were affected by early retirement are receiving 64% of the salary they earned before the
crisis began.
There was no union representation of temporary workers in the parent cooperative and
given that the majority of them wanted to become members, they were usually docile
and quite uncritical when demanding their rights as workers (Amado-Borthayre, 2009).
Therefore, not renewing their contracts in Basque factories was less conflictual than in
nearby large unionised investor-owned firms.
The peak of employees without ownership rights (7,150) was reached in 2006 after the
acquisition of the French competitor Brandt. In 2012 only 3,606 remained, most of them
in French and Polish subsidiaries. Other FED production plants around the world in
2013 are shown in Figure 1. For more information on FED’s organisation chart, see
Basterretxea et al. (2020).
10
Figure 1: FED’s production plants in 2013.
FED had a 30% equity participation in another production plant in
Shanghai (China).
Source: Data gathered from interviews.
Interviewees highlight that FED’s plans to cut jobs at the French subsidiary Brandt were
difficult to implement. Brandt’s union culture and French labour legislation were
unanimously cited as factors that slowed projected adjustment plans and made them
much more expensive. Conflicts, work stoppages and strikes across Brandt facilities
happened whenever jobs were at stake (Errasti et al., 2016; Kasmir, 2018). Despite
union opposition, close to 2,300 job losses happened in Fagor-Brandt in the 2006–2013
period, via layoff proceedings, non-renewal of temporary contracts, natural and early
retirements, agreed withdrawals, dismissals and the transfer of production plants to
other firms (Errasti et al., 2016).
French unions sought solidarity with FED’s SC members to prevent layoffs and to
create integrated trans-spatial strategies of resistance, as unions often do in different
sectors (see Gialis & Herod, 2014). They soon found that solidarity was impossible. The
special labour agency of FED members, given their dual condition of workers and
owners, impeded collaboration.
French unions called me to a meeting in which they proposed to have a
relationship with us. I was honest and told them we couldn’t have a
conventional union relationship because I was a partner. I took part in the
decision to buy Brandt. So the relationship that I was going to have with the
French union was that of a (owner) member. I told them: ‘I can’t share
information with you because I have a conflict of interest, and I’m going to
11
defend the Mondragon jobs. And if at any given time a Brandt factory has to
be closed, however hard it is, it will be closed before a Mondragon one’. (SC
Member)
When FED implemented an adjustment plan in its Polish subsidiary in 2008, efforts of
the Polish union Sierpen 80 to develop trans-spatial solidarity actions were also rejected
by FED’s worker-owners, who sought to defend jobs in Mondragon (see also Errasti et
al., 2016; Kasmir, 2018).
Functional Flexibility via Relocation
Even before the 2008 crisis, some FED business units were running at a loss
(Basterretxea et al., 2020). In 2005 losses of the business unit producing fridges reached
14.5 million euro; the washing machines unit lost 6.4 million and the dishwashing
machines unit 4.2 million (Fagor Electrodomésticos, 2006). A FED manager and SC and
GC member reports that heavy losses in the fridges unit forced the company to reduce
this unit’s staff from 903 workers in December 2005 to 375 in June 2008. These
redundant members were relocated to other units and other nearby Mondragon
cooperatives. The interviewees in this study highlight that those early relocations and
other measures to try to make the fridges unit profitable again were decided by a
committee of 70 fridges unit worker-owners. This democratic decision making, and the
fact that most relocations of the 2006–2008 period took place in other cooperatives of
the same Mondragon town, diminished worker resistance to relocations. Instead, the
massive relocations of the 2010–2013 period were slower than planned because of the
working member resistance to them. Several interviewees, from managers to SC
members, agree that this strong resistance was because many members experienced
relocations ‘as a drama’. There were four main reasons for this: (1) a culture with a high
sense of belonging to each business unit; (2) fear of uncertainty and routine change.
Fear was greater when worker-owners were relocated to very different tasks in distant
cooperatives that asked for longer commuting time and worsened their work–life
balance;
People were alarmed, they said: ‘Damn it! My life is going to fall apart! I make
fridges. I know what I do. I know how to do it. And now what are they going to
do with me? […] Are they going to relocate me to another cooperative and to
a different job? […] How am I going to do that? Will they respect my
schedule? I have young children!’ or ‘I’m 55 years old and now I have to learn
other new jobs? What’s going to happen to me?’ That’s what I sensed, that
was the fear, the restlessness. People didn’t internalise that ‘I have to go
where the work is’ almost until the end. […] From the SC we also put up
barriers to relocations. They were our last option. (SC Member)
(3) the fact that, according to the interviewees, most FED worker-owners never thought
the company could go bankrupt and assumed Mondragon Corporation would never
allow its most important industrial cooperative to fail. This false sense of security
reinforced individual and collective resistance to relocations; and (4) the fact that when
many supervisors had to decide who was to be relocated, they maintained their team’s
best performers and relocated those worker-members with worse performances. Thus,
being named for relocation created a negative stigma.
12
This kind of attitude was the natural way for members to protect themselves
from the ploys of the management to declare relocatable the one they did not
like. (FED Manager and SC and GC Member)
Besides active resistance to relocations through worker-owners’ representatives in the
SC, multiple individual acts of resilience (Katz, 2004) slowed down the relocation
process.
Some members avoided being relocated to other cooperatives on the grounds of a work
disability. In 2005, 279 FED members (8.1% of the total) had a work disability (Figure
2). According to plant managers and human resources (HR) managers, this made
relocations difficult. The percentage of members with any kind of disability almost
doubled to 15.6% in 2013. According to the interviewees, those percentages were much
higher among blue-collar worker-owners.
Figure 2: FED partners with disabilities by age group in 2005.
Source: Fagor Electrodomésticos (2006).
FED’s internal medical service was responsible for evaluating worker-members’
disabilities and for providing internal medical documents acknowledging a disability
that prevented them from performing certain jobs. These documents were used
internally and were unofficially known as papeles médicos; they are often mentioned in
the interviews.
The high levels of worker-owners with a disability are partially explained by the FED
recruitment policy social goals that explicitly promoted the integration of disabled
candidates. There is nevertheless an almost unanimous opinion among the interviewees
about the hidden fraud behind the use of papeles médicos as a barrier against functional
flexibility, relocations and flexible schedules. Interviewees also criticise that the internal
medical service granted these disability recognitions too easily.
13
When everything started to fall, they asked for papeles médicos. [...] ‘Am I
going to be relocated? I’ll say I’ve got tendinitis; I’ll go to the factory doctor;
he’ll sign me a papel médico, and I will elude relocation. How are they going
to relocate me where there’s a vacancy if I’m not going to be able to work? [...]
They will assign me some simple tasks and then another member will be
candidate for relocation’. What culture is being generated, especially at the
workshop level? Well, the next candidate says: ‘Me too!’, ‘The last one is a
rotten egg!’. (SC Member)
Interviewees also describe a culture of relocation denial that forced the HR department
to relocate partners from more profitable lines:
When trying to relocate partners from deficit lines, you reached a point where
you had got to the bottom of the matter. You had already removed [from the
list of relocations], those who could retire, those over 55 and those who had
taken the reduction in working hours who could not be relocated by
regulation. So you had to relocate partners from other lines or chains that
were profitable. (FED Manager)
The percentages of members with papeles médicos were higher among the direct
workforce and in some specific business units. A FED manager and SC and GC member
reports that during the first relocations, between 2005 and 2006, 35% of the direct
workforce in the fridges unit had papeles médicos. These members could not be easily
relocated to other tasks and business units, let alone other cooperatives.
According to a SC member, the number of members with papeles médicos became such
that a section known internally as Txagorritxu (the name of a large hospital near
Mondragon) was set up with non-relocatable members who carried out simple tasks at a
loss.
When FED was closed, more than 250 partners had some kind of disability to
work, what we called here papel médico. So sometimes we just made up
positions for that kind of person. There were loss-making simple assembling
and disassembling sections for these people, and those sections got larger
and larger. (FED Manager and SC and GC Member)
As previously analysed by Basterretxea et al. (2019) absenteeism rates increased
significantly in the last two decades of FED’s history, from 4% until mid-1990s to 8.8%
in 2010. Sick absence increased significantly in 2009 and 2010 when the firm was
implementing massive relocations. According to some interviewees, sick absence was
also a way for many members to avoid relocations.
Another barrier some members used to avoid being relocated to other cooperatives was
to adhere to FED’s Law on the Reconciliation of Family Life and Work. When the
application of this regulation caused changes in relocation candidates’ working hours
that the receiving cooperatives could not deal with, candidates remained in their home
cooperative.
Many partners chose to reduce their workday when they started seeing storm
clouds ahead. When there were rumours of people being made redundant,
14
many said: ‘No, I'm taking care of my children. I'm only going to work four
hours and that will exempt me from relocation’. (SC Member)
Some interviewees stress that relocation policies were also offered to managers. Firing
or demoting underperforming managers or those who repeatedly made poor investment
decisions was very difficult because they were cooperative members. Many rank and
file interviewees criticise that even these managers, with the most responsibility for
FED’s failure, were the first to be relocated to other cooperatives and even promoted to
higher positions in Mondragon, where their performance often remains low.
Financial or Wage Flexibility
FED members agreed to stop receiving interest and extraordinary payments and to
reduce their salaries progressively. As Basterretxea et al. (2019, 2020) highlight, the
debates on salary cuts in annual general assemblies were highly conflictual and often
members voted against reducing their wages or voted in favour of reducing them by
steady margins. Nevertheless, salaries were reduced year by year until reaching a 20%
salary decrease in May 2013.
There was a kind of unwritten social pact which said: ‘I accept salary cuts as
an effort, but here there is no lack of work, here nobody gets the sack [...] and
nowadays that’s a privilege that nobody has’. (SC Member)
In a sign of high inter-cooperation and solidarity, cooperative members of another 110
Mondragon cooperatives voted in May 2013 to reduce their salaries in order to award a
70-million-euro loan to FED. Consequently, most of these cooperatives’ worker-
members reduced their salaries by 1%, while the Fagor Group cooperatives’ reduction
was by 6.48%.
Wage flexibility usually affects worker-members at parent cooperatives and does not
apply to wage labourers in subsidiaries. That was not the case in FED’s Polish
subsidiary, Wrozamet, where a reduction of wages was agreed in 2008. Wage cuts were
negotiated with the union Solidarity but generated strong opposition from Sierpen 80,
strikes, conflict and labour unrest (Errasti et al., 2016).
Temporal Flexibility
It is noticeable that the use of flexible calendars became the flexicurity tool that
received most support from FED members and the SC between 2007 and 2013.
According to the regulations in force, Lagun Aro covered 80% of the salary
corresponding to the hours not worked and not subsequently made up (Bradley & Gelb,
1987). In the 1970s, 80s and 90s crises, flexible schedules had been a source of
competitive advantage for cooperatives because members recovered the hours not
worked in the months and years after the crisis, see, for example, Whyte & Whyte
(1988) or Clamp (2003). That was not the case this time; the prolongation and
deepening of the crisis from 2007 until the disappearance of the company in 2013 meant
that the hours not worked (but paid) could not be recovered in following years. Some
interviewees point out that some business unit partners, such as those of Fagor Mueble,
owed more than 1,000 hours of work per capita. Working time flexibility should be used
to alleviate transitory difficulties, not to perpetuate a firm’s structural problems,
interviewees argue.
15
We voted to reduce our working hours, close the factories two weeks in
Easter instead of one, 45 days in summer instead of one month, or even not
to work on Fridays for a whole year. Those non worked hours were paid even
if we were often unable to make them up. These working time flexibility
measures are fine as a solution for short crises like the ones in the past. But
for one as long as this it is a mistake because you are just postponing a
decision you have to make, because otherwise these measures will lead to
closure and vitiate people. (SC Member)
Situation of flexicurity after the closure of FED
In October 2013, the 5,600 workers that remained at FED fell into three categories:
1,895 worker-members and 200 temporary workers on short-term contracts in Spain,
and 3,500 workers in international subsidiaries.
The different agents (former FED members, host cooperatives, Mondragon Corporation
and Lagun Aro) took different positions and measures to protect FED’s 1,895
unemployed members. In contrast, the jobs and incomes of temporary workers and
subsidiary employees were unprotected. Foreign subsidiaries were closed or were
bought by competitors (Cevital bought Brandt and Bosch-Siemens bought Wrozamet)
only to reopen with severely reduced workforces (see also Kasmir, 2016; Errasti et al.,
2016).
Mondragon’s Protection of Former Members
Mondragon prioritised the management of partners’ positions and designed an
immediate action plan.
Social security system and unemployment benefits of Lagun Aro
Fees to cover unemployment in Mondragon cooperatives have been historically lower
than the fees conventional Spanish firms contribute to the National Social Security,
providing a long-term competitive advantage via lower social costs over capitalist
companies (Whyte & Whyte, 1988; Ormaechea, 1998; Basterretxea & Albizu, 2010).
Before the crisis, in the 2000–2007 period, the Mondragon cooperatives’ unemployment
insurance fee remained at an average of 1%, far below the 7.05% unemployment
insurance fee for workers affiliated to the Spanish National Social Security System
(Basterretxea & Albizu, 2010). As Table 1 shows, this competitive advantage has
narrowed since the 2008 financial crisis, and, particularly, since FED’s bankruptcy in
2013.
16
Table 1: Unemployment payments and benefits in Mondragon (in thousands of euro).
Year % Fees Fees Interests Benets Annual
balance
Accumulat
ed balance
2007 1.00% 6,635 1,690 3,226 5,099 68,067
2008 1.00% 7,023 1,869 7,448 1,444 69,511
2009 1.00% 6,992 1,261 23,209 - 14,956 54,555
2010 2.00% 11,909 167 18,043 - 5,967 48,588
2011 2.00% 13,812 86 21,492 - 7,594 40,994
2012 2.00% 13,742 1,193 19,006 - 4,071 36,923
2013 3.00% 18,712 1,559 30,438 - 10,167 26,756
2014 6.50% 43,831 325 43,502 654 27,410
2015 6.50% 43,687 134 32,528 11,293 38,703
2016 6.50% 43,783 469 25,666 18,586 57,289
2017 6.00% 41,640 1,659 23,150 20,149 77,438
2018 5.50% 23,415 - 1,150 22,265 - 77,438
2019 5.50% 38,350 2,770 21,870 19,250 96,688
Source: Lagun Aro (2007–2019). Annual Reports.
In the previous crises of the 1980s and 1990s, relocations and flexible calendars were
prioritised, and early retirement was the last resort due to its economic impact (Bradley
& Gelb, 1987; Landeta et al., 2016). That was not the case in the 2008–2015 crisis. Due
to the Taylorist production systems at FED, training requirements for basic blue-collar
positions were scarce and hundreds of FED worker-members did not have a vocational
training qualification (Basterretxea et al., 2019). A result of this has been that
relocations to other cooperatives have been difficult, especially the relocation of older
members. Thus, as Table 2 shows, early retirement is the biggest cost of Lagun Aro’s
employment policy between 2007 and 2019. The second most costly measure is that of
unemployment benefits and benefits for those members affected by flexible schedules
who were unable to make up hours not worked. In opposition to previous crises,
voluntary redundancy of members has been promoted with more than 13 million euro.
17
Table 2: Expenditure in Mondragon flexicurity and employment policy benefits 2007–2019 (in
thousands of euro).
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 TOTAL
Unemploym
ent &
*exible
schedule
benets
201 3,23
6
10,7
45
1,02
1
4,88
2
2,88
7
11,2
80
15,4
15
5,02
3
3,44
8
1,89
2
2,02
4
2,57
364,627
Temporary
relocations 299 376
2,19
1
2,77
8
1,42
3
1,46
4
2,22
9
7,16
0
6,59
7
5,07
6
4,75
6
5,34
7
5,18
8 44,884
Permanent
relocations 609 109 297 607
3,91
9
3,15
0
5,69
5
6,06
5
1,43
3
3,63
9
4,80
5
5,17
4
5,48
6 40,988
Early
retirement
1,98
5
3,26
3
9,01
5
10,5
20
10,8
81
10,6
82
10,2
61
14,5
94
14,6
62
12,4
72
11,1
26
9,05
7
6,85
0
125,36
8
Severance
pay 132 464 961
3,11
7 437 823 973 169
4,60
5 855 439 608
1,75
8 15,341
Vocational
retraining
plan - - - - - - 97 97 198 177 133 56 10 768
Source: Lagun Aro (2007–2019). Annual Reports.
In addition to relocating members in other cooperatives, 350 former FED members were
hired in 2014 by a Spanish competitor, CNA-Cata, that continued to produce white
goods products in some of FED’s former factories and to use the Fagor brand (Arando
& Arenaza, 2018). CNA-Cata failed to make this relaunch profitable and most relocated
worker-members re-joined Mondragon in 2017 and 2018.
Arando & Arenaza (2018) used data on the number of former FED members affected by
different flexicurity measures to highlight the adequacy of these policies in providing
solutions for redundant former FED members. Through information gathered from
several interviews, we see how, by early 2021, flexicurity had provided a response to
1070 former members in terms of relocations, and to 881 former members in terms of
retirement, early retirement, voluntary redundancies or unpaid sabbatical leaves.
To make relocations possible, Mondragon created an employment office and an
instrumental cooperative, called Udalaitz. The employment office was represented by
members of the Mondragon HR department, the FED personnel department and a
Lagun Aro representative. Its tasks were to (Arando & Arenaza, 2018):
Classify unemployed partners based on their attitudes and skills.
Analyse the supply and demand for employment in the cooperatives and look for
jobs that match these partner profiles.
18
Create jobs in other cooperatives and new value-added activities, such as the
after-sales service cooperative Sareteknika in October 2014, which employed 21
former FED members.
Encourage the relocation of members with social, functional or training
problems through retraining programmes and the subsidy of their salary costs
subject to their consolidation.
The instrumental cooperative Udalaitz was established at the end of 2014; it welcomed
former FED members as its own members, allowing them to receive their payroll and
the aid from Lagun Aro. In addition, it manages relocations by administering the
curricula vitae and histories of the members and assigns them to the cooperatives that
require workers (Arando & Arenaza, 2018).
Perception of former FED partners toward the protection of Mondragon and the
consolidation of inter-cooperation
Thanks to flexicurity measures, only 56 former FED members remained unemployed in
early 2021. Far from being critical of some aspects of the flexicurity measures in
general, and relocations in particular, most interviewees highlight that those measures
are much better than unemployment:
I've lived through a company closure and haven't been unemployed at all. I
haven't missed a single month. [...] I've been able to feed my family. [...] I have
not gone through 700 interviews. [...] Before the closure of FED I went to the
personnel department and asked if they needed people in another
cooperative of Mondragon. They said: ‘Of course, give me your CV’. [...] They
interviewed me at the other cooperative and I went in the first time. That's a
strength. (SC Member)
The interviewees also highlight that high levels of inter-cooperation among Mondragon
cooperatives have helped to mitigate the social cost of FED’s bankruptcy.
Some interviewed managers consider the flexicurity policies and their results as a
complete success story, which is in line with previous researchers such as Arando &
Arenaza (2018). Nevertheless, many interviewed rank and file worker-owners, their
representatives in the SC and also several middle line managers are much more critical.
They highlight that by early 2021, more than seven years after FED’s demise, about
40% of the mentioned relocations were still of temporary basis.
There is a lot of demagoguery about this in Mondragon, they say: ‘We have
provided a solution for 2,000 workers.’ But many solutions have been early
retirements, voluntary leaves. [...] The number of definitive relocations is not
that great. It is not enough to be proud of or to say in a press conference or
an interview that ‘the Mondragon cooperative system is strong and powerful
because it has managed to relocate all those who have left FED’. (SC
Member)
In addition, a SC member criticises cases where, if a former member – due to the delay
in their relocation – finds work outside the Mondragon Corporation, Udalaitz notes it as
a new success story.
19
The interviewees point out the existence of worse working conditions in the host
cooperatives for those temporarily relocated members, who feel as if they are working
for a temporary employment agency:
Being the Temp Agency of Mondragon is not a solution. Maybe it's a better
solution than staying home unemployed, but you can't say it's a solution.
(FED Manager and GC Member)
There is a great feeling of unhappiness among temporary relocated former
FED members. The Mondragon cooperatives that temporarily relocate them
think: ‘I don't have the obligation to consolidate you in my staff. I have you as
a temporary employee and if tomorrow the workload goes down, the day after
that you ain’t coming’, as in any Temp Agency. [...] Inertia leads to giving the
worst jobs to relocated partners. (SC Member)
Many former FED members are relocated for several months to one cooperative, then
are unemployed for several months, and afterwards are relocated to the same or an
alternative cooperative. Interviewed relocated members fear that many members will
consume the maximum two-year unemployment benefit that Lagun Aro provides.
If you are relocated temporarily for six months and you are unemployed for
another three months, it is like Chinese water torture, little by little, one day
you have wasted the two years. (SC Member)
Some of the interviewees have been temporarily relocated for up to six years in the
same cooperative. They argue that relocated members suffer underpaid inequity, often
they do not receive salary increases linked to performance evaluations and also suffer
inequities when it comes to sick absence and overtime pay.
Some permanent solutions, such as pre-retirement and early retirement, are also
criticised by interviewees, given that they suppose a sharp reduction of income.
End of Former Partners’ Resistance to Relocations
The interviewees consider that after FED’s fall, there was a change in the scale of values
of many members who had previously resisted relocation. Likewise, Lagun Aro began
to sanction, with a three-month cut in salary, any former partner who refused to be
relocated.
Interviewed managers point out that many members who had used their papeles
médicos and their supposed disability to avoid relocation, voluntarily asked to have their
papeles médicos removed. Udalaitz also commissioned an external medical team to
analyse all partners who had a recognised disability at the closure of FED to see which
ones had a real limitation that prevented them from being relocated.
When FED was closed, we had more than 250 members who could not work,
and one of the first decisions we made was to have an external medical
check-up. [...] After that medical examination, the number of members who
really had some kind of disability went from 250 to 51. [...] This is a fact that
tells a lot of things. (FED Manager and SC and GC Member)
20
80% of the members who claimed to have a disability have experienced a
miraculous cure, and I'm very happy that now they have another approach to
life! People who for many years said they couldn't do many jobs, now do any
job, any shift. (FED Manager)
Barriers of other Cooperatives to Relocation after FED’s Fall
Senior managers and SC members expose a resistance to the consolidation of temporary
relocated members into permanent ones by some host cooperatives. The main reasons
for this are summarised below.
Fear of loss of staff flexibility
Many interviewees underline that staff flexibility is an important argument of other
cooperatives which are not willing to consolidate temporarily relocated FED members
into their workforce:
Uncertainty is the main issue. Many Mondragon cooperatives have workload
problems. The fall of FED helped them to understand that they have to be
very careful when increasing staff and there is such a psychosis [...] So for
them it's worth having a temp worker instead of a consolidated member. (SC
Member)
Dismissal of temporary employees
According to managers and SC members, Mondragon’s request to the cooperatives to
give unemployed former FED members the vacancies covered by temporary employees
and candidates for membership has generated some situations of rejection in the
receiving cooperatives.
Imagine that your son is 20 years old and has studied mechanics. He can't
find work in the area, so you think: ‘He may get hired in the cooperative
because there's a place for him [...]’. And then you are told: ‘Your son's gonna
stay out of the cooperative because we're gonna host a relocated FED
member’. Then you say: ‘Relocated members suck’. This is very easy to
perceive. I've been relocated for almost seven years now, and I still have to
hear these things. (SC Member)
Some successful cooperatives demand to cover only half of their eventual positions with
FED relocated members and to keep the other half free for their eventual workers. A
manager in one of these cooperatives justifies this:
In many host Mondragon cooperatives, relocations have not created jobs, but
have changed their nature. [...] Relocations are our commitment to
Mondragon. [...] But we also have a commitment to the region where our
cooperative is located, where there are unemployed people. That has to make
the difference. (Mondragon Manager)
Negative attitude of former FED partners
21
FED suffered high absenteeism levels for a long time and a complacent culture made
shirking easier for many members (Basterretxea et al., 2019). The poor perception that
many members of other Mondragon cooperatives had about FED’s culture has made
relocations more difficult. A manager of a cooperative relocating many former FED
worker-owners illustrates it:
We have had our very, very big doubts and suspicions about the people
coming from FED. We've met some very good people and some very bad
people. We have expelled 11 relocated people from FED because they were
not meeting minimum commitments. Some cases have been very
representative of the ‘FED Model’, like a member faking sickness absence.
[...] They would do that at FED anyway, but not here. (Mondragon Manager)
From the other perspective, former FED SC members have spoken about their
perception of being rejected in other cooperatives where they have been relocated to:
We have just closed down a company, and on top of that we have asked the
whole Mondragon Corporation for money, we have indebted other
cooperatives, [...] everything in vain, finally closing down FED. We were in
meetings [with members of other cooperatives] and people said: ‘These
fucking FED members, they have closed one company and now they are
coming here to close another one. [...] Fucking relocated people, why don't
they go home? [...] And, besides, they come here now to take our jobs? [...]
We don't want suckers here’. [...] So you have a stigma on your back for being
relocated and not being like them. (SC Member)
Interviewed former middle-line technicians and managers have found it easier to get a
permanent relocation in other cooperatives. They nevertheless share the idea that many
former FED members, mainly in blue-collar positions, have not been well received in
many cooperatives. Some managers criticise that other Mondragon cooperatives are
blaming former FED members and their attitudes as an excuse to not relocate them.
Low educational profile of former FED partners
Given its Taylorist production chains, FED employed many low skilled worker-
members (see Basterretxea et al., 2019). Low education requirements made it easy to
relocate other cooperatives’ worker-owners in the 1980s and 1990s crises:
In the 1990s [...] hundreds of relocated people arrived at FED from other
Mondragon cooperatives on buses, [...] people whose training was not
evaluated. The last and largest relocation station was FED because it had
assembly lines, and in the chains any trainee is able to work with a little help
and skill. (Mondragon Senior Manager)
The same low training requirements, which made FED a good company to relocate
other overstaffed cooperative members to in the past, became an impediment to
relocation when FED was the overstaffed company. According to interviewed FED
managers, six years after the fall of FED, approximately half of the former members
who were still temporarily relocated had no vocational training and many had no
compulsory secondary education. This undermines the foundations of functional
22
flexibility and prevents members from aspiring to permanent relocation in many
Mondragon cooperatives.
Many former FED worker-members have been reluctant to take part in vocational
training courses. This reluctance has been perceived even by interviewed Basque
Government officials, who offered vocational training programmes to FED members
when the company went bankrupt:
We met with FED's SC and [...] what surprised me most was that [...] when we
mentioned the importance that training has for the success of the relocations,
people were reluctant. Although they can be relocated to a job and there may
be a plan to improve their training, it seems like they don’t want it. [...] Even
though it is beneficial to both them and the cooperative. […] In addition, we
saw that there were people with very low qualifications, and a strong
relocation effort was needed, together with institutions such as Lanbide
(Basque Employment Service). There was a big problem with this. (Senior
Government Official)
Mondragon’s response
Mondragon and Lagun Aro do not have executive authority to impose relocations, thus
relocation policy depends on the goodwill of the cooperatives that have vacancies
(Arando & Arenaza, 2018). As Table 2 shows, besides relying on goodwill, Lagun Aro
gives important economic incentives in order to increase permanent relocations.
According to interviewees, Lagun Aro pays 82,000 euro to its cooperatives for each
temporary relocated member who is older than 50 and who is offered a permanent
relocation; the aid amount is 66,000 euro if the member is younger than 50. This is all
under the condition that, if the activity of the receiving cooperative does not sustain the
employment of its members, the first to leave may be the last to be relocated, at no
additional cost. Even so, the already mentioned fear of the loss of flexibility in the
workforce leads many host cooperatives to reject the agreement.
In 2013 Mondragon and Udalaitz, with funding from the Basque Government and
Lagun Aro and through agreements with their training centres, also provided vocational
retraining for 340 former FED members with permanent relocation difficulties because
of low or inadequate qualifications (TU Lankide, 2015). Arando & Arenaza (2018)
expose that this plan was preceded by one to obtain the compulsory secondary
education diploma. The objective was that these former partners could obtain an official
degree in mechanics or mechatronics – studying four hours, from Monday to Thursday
during a three-year period – in order to achieve permanent relocations. Lagun Aro
facilitated the leave of absence with a single payment protection. In addition, the
training hours had an impact on unemployment benefit and 50% of these hours were
returned once the training was completed. During the 2014–2015 academic year, only
52 of the aforementioned 340 former FED members agreed to enrol in the first course of
the educational programme. In the 2016–2017 academic year, only 35% of these 340
members took the training, among which 41 were already in the third course (Arando &
Arenaza, 2018).
23
However, according to interviewees, these measures should have been taken before
FED’s closure. Other cooperatives in the Fagor Group took interim HR management
measures as early as the 1980s.
When their training plans are something they establish when there is no other
solution, they don't work. [...] It had to be done long before FED was in
trouble, when the problem started to show. [...] Now, if they propose a training
plan to me from Udalaitz, in my receiving cooperative they will say: [...] ‘You
are not my partner, [...] I don't give a damn if you study or not, fend for
yourself to study, do it in your free time. Now, do I have to give you free time?
No, not at all’. Udalaitz proposes that you stop working and start studying, but
you lose your job. They help you; they make things easier for you, but it is still
a risk to start studying. (SC Member)
DISCUSSION AND CONCLUSIONS
This paper adds evidence, at a corporate analysis level, to the studies that link poor
implementation of flexicurity policies and increased labour market precariousness
(Domínguez, 2012; Fernández-Rodríguez et al., 2012; Gialis et al., 2014; Gialis &
Taylor, 2016). In fact, some flexicurity policies applied to face FED’s crisis – temporary
relocations seven years after the firm’s closure, long-term wage cuts, or functional
flexibility and relocations of workers without proper multi-skill training – could be
labelled as flexiprecarity (López et al., 2014).
FED’s case also shows that the negative effects of flexicurity policies on satisfaction
and commitment increase when these measures are driven by contextual factors,
consistent with previous research (Origo & Pagani, 2008).
As in the past, Mondragon’s flexicurity mechanisms have helped to lessen the
employment crisis effects generated by FED’s collapse. Nevertheless, the findings of
this research suggest that the competitive advantages flexicurity gave to Mondragon
cooperatives have been significantly reduced since the 2008 financial crisis.
The long-term competitive advantage via lower social costs (Whyte & Whyte, 1988;
Ormaechea, 1998; Basterretxea & Albizu, 2010) has been diminished. The fees that
Mondragon cooperatives pay to finance unemployment coverage have grown
significantly and are, nowadays, close to the fees non-cooperative competitors pay to
the social security system. The types of benefits have also changed. Almost three
quarters of the benefits paid in the 2008–2015 period have been devoted to goals that do
not offer greater labour flexibility: unemployment benefits, early retirement and
severance pay for voluntary redundancies.
In the 2008 financial crisis and in the pre- and post-failure of FED, relocations have
been more difficult because the crisis affected many cooperatives in different industries
at the same time. Furthermore, a large part of FED’s workforce was difficult to relocate.
Many older redundant members with low vocational training certifications were offered
early retirement. Flexible schedules did not offer the same competitive advantage of the
past either. In fact, a great part of the unemployment benefits paid in the 2007–2018
period was paid to cooperative members affected by flexible schedules who were unable
to recover non-worked hours. Flexible schedules work well and give competitive
advantages in short crises, when hours not worked can be easily made up in following
24
months. In a long crisis, such as the one that affected FED from 2007 to its demise in
2013, flexible schedules act as a way to delay harder decisions and perpetuate a firm’s
structural problems.
Conventional Spanish firms’ labour flexibility, which has increased since the 2012
Spanish labour market reform (López et al., 2014), also explains why flexicurity
policies are less important sources of competitive advantage for Mondragon than in
former crises.
These findings also add evidence to the growing body of labour geography, by studying
how workers can play important active roles in shaping the way labour markets function
and in refusing worse employment conditions. This is accomplished by analysing the
role of FED’s three-tier spatially segmented workforce – worker-members in the Basque
country, temporary workers in the Basque region and in Spain, and wage labourers in
international subsidiaries.
Drawing on Katz’s (2004) disaggregation of agency into acts of resistance, reworking
and resilience, FED’s wage labourers in international subsidiaries resisted external
numerical flexibility measures through trade union collective action, work stoppages
and strikes. The French and Polish unions’ efforts to escalate conflict and develop
French–Spanish or Polish–Spanish solidarity actions against austerity and downsizing
measures failed. The study findings show that developing trans-spatial solidarity actions
between traditional unions and workers’ representatives in cooperatives is unfeasible
given the special labour agency of worker-members.
In contrast with previous research on Mondragon flexicurity policies, this research
shows that, in the specific case of FED and the context related to its fall, there is a
strong resistance to relocations and functional flexibility. There were many reasons why
former FED members resisted functional flexibility and relocations before the
company’s demise: strong sense of belonging to the business unit they had been
working for historically, fear of uncertainty and change of routines, false sense of
security and the need to avoid the stigma of being relocated.
The response of worker-members to austerity measures differed significantly from that
of wage labourers in foreign subsidiaries, since they were the ones who voted in favour
of labour flexibility measures in the general assembly and cooperative regulation
forbids strikes over workplace grievances. Active agency resistance actions took place
in the various general assemblies where austerity measures decisions were made. The
SC also actively opposed and slowed down some flexicurity measures, mainly
relocations. This study also offers evidence of strong passive agency of worker-owners.
The collected quantitative data and interviewees’ opinions suggest that FED worker-
members used individualistic ‘scrappy acts of resilience’ (Katz, 2004) to avoid being
relocated to other cooperatives, such as pretended medical disabilities, sick absence and
reduced leave schedules.
The opposition to relocations raises the question whether the nature of cooperatives
neutralises the moral risk of labour relations (Navarra & Tortia, 2014). Given
cooperative members’ dual condition of workers and owners, Mondragon’s official
discourse often transmits that their workplaces are free from labour–capital and
management–labour conflicts. Some researchers echo this official discourse, even
arguing that Mondragon eliminates the basic agency dilemma, since principals are
25
agents and agents are principals (Mathews, 2003). In sharp contrast with this idyllic
view, these findings add evidence to other studies that highlight the risk of conflict and
‘free-riding’ (Basterretxea & Storey, 2018; Basterretxea, et al., 2019; Bonin et al., 1993;
Klein, 1987; McCarthy et al., 2010; Pendleton & Robinson, 2010). Future research in
this field would be necessary to clarify the true perception of members without
management responsibilities toward their relationship with managers and with the
cooperative itself.
Moreover, although this study focuses on flexicurity policies applied mainly to rank and
file workers, as previous researches did, it also makes a relevant contribution to the
literature on FED’s failure by mentioning the application of these policies to managers,
something not previously addressed. Even low performing managers, who were the
most responsible for FED’s failure, were given priority to be relocated to other
cooperatives and even promoted to higher positions in Mondragon. This employment
security for cooperative managers raises questions about its efficacy in dealing with
crises as well as ethical questions, which open up a new fruitful path of future research.
These research findings also highlight another factor largely overlooked by previous
Mondragon literature: host cooperatives’ barriers to permanently relocate other
cooperatives’ redundant members. Despite economic incentives to convert temporary
relocated members into permanent ones, more than 400 former FED members are still
temporarily relocated more than seven years after the firm’s demise. There are several
reasons for not offering permanent relocations: (1) fear of a loss of staff flexibility; (2)
refusal to fill posts belonging to temporary employees of the receiving cooperative with
relocated FED workers; (3) perception of poor work ethics among some former FED
members; and (4) the low educational profile of many former FED members.
A lack of preventive training by FED led to a negligent application of functional
flexibility, which requires workers capable of occupying many positions (Albizu &
Basterretxea, 1998; Landeta et al., 2016). As recommended by Fernández-Rodríguez et
al. (2012), a more preventive focus is proposed for future crises. Each cooperative firm
must have its own process to systematically identify worker groups at risk of de-
professionalisation. Some Mondragon cooperatives ask for vocational training
qualifications for all candidates willing to become worker-owners. These training
requirements facilitate potential future relocations and future retraining programmes. In
the case of FED, the vocational retraining programmes began in 2014, once the
company had disappeared and almost ten years after the first massive FED relocations
took place at the fridges unit. In the early phases of future crises, vocational retraining
programmes should be promoted.
Wage flexibility is also considered by interviewees as a proper measure of cooperatives
to face short time crises. When used for many years, as in FED, it generates many
negative attitudinal and behavioural outcomes as already found in previous studies
(Basterretxea & Storey, 2018; Basterretxea et al., 2019). The competitive advantage of
cooperatives through wage flexibility has decreased in relative terms. After the 2008
financial crisis, legislative changes in Spain have also increased wage flexibility of
other non-cooperative companies.
It has been found that former FED members positively perceive the job security
provided by Mondragon. Nevertheless, they feel they have become part of Mondragon’s
temporary employment agency. Although the partners’ concern about their
26
employability has disappeared, the poor conditions related to relocations that the
interviewees have exposed seem to be a concern of the same calibre.
Some of this study’s findings also have implications for managers of non-cooperative
firms adopting flexicurity policies. Sadly, the Covid-19 coronavirus crisis implies that
some of those policies must be applied on a large scale in the whole economy. Flexible
schedules have been imposed by force in most Spanish firms during the coronavirus
lockdowns. All workers in non-essential jobs have been paid recoverable leave from
30th March 2020 until 9th April 2020. Those workers will have to gradually make up
the hours not worked during this period, in a way that is agreed with their employer.
Similar lockdowns in other European, American and Asian countries will also force the
adoption of working time flexibility. Following the lessons of FED’s case, flexible
working time will help to alleviate transitory difficulties in firms operating in industries
with fast V-shaped recovery. Firms with large L-shaped crises probably will not make
up not worked hours. Similarly, wage flexibility can also be a good short-term policy for
firms with rapid recoveries, while it can generate long-term negative attitudinal and
behavioural responses in firms with a long-term crisis.
Some conclusions drawn from this paper should be considered within the specific case
of FED’s culture circa its fall; it was never intended for them to be extrapolated to the
rest of the Mondragon cooperatives. While Taylorist production systems and low
education requirements to become blue-collar worker-members in FED have made
functional flexibility and relocations difficult, it is necessary to underline that most
Mondragon industrial cooperatives have been adopting much more flexible forms of
working, such as mini-factories, with higher educational and multi-skill requirements.
Many other firms will also have to adapt their products to new market demands, and as
in the case of Mondragon cooperatives, those with already high functional flexibility
and a multi-skilled workforce will find it much easier.
ACKNOWLEDGEMENTS AND FUNDING
This article is a result of a research funded by the University of the Basque Country
UPV/EHU (GIU-19/035) and Fundación Emilio Soldevilla para la Investigación y el
Desarrollo en Economía de la Empresa (FESIDE).
We would like to show our appreciation to those former FED members who have given
us their attention, time and knowledge. A special acknowledgement goes to professor
Iñaki Heras-Saizarbitoria and the reviewers for their suggestions that have helped to
improve the manuscript.
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