ROME (Reuters) - Italian government signed an agreement with Electrolux on Thursday to preserve the Swedish white goods multinational’s four sites in northern Italy and protect the 6,000-strong local workforce, in exchange for tax breaks and union concessions.
Under pressure from cheaper manufacturing locations in eastern Europe, Electrolux (ELUXb.ST) had planned steep benefit and wage cuts for workers it employs in Italy and was set to close a washing machine plant in the town of Porcia.
However, after reaching a deal with unions and the government which will see changes in operational practices and tax breaks for reduced working hours deals to protect jobs, the company agreed to revise its plans.
“This is a very significant and important agreement, which creates a new and more modern approach to industrial relations,” Industry Minister Federica Guidi told reporters after the formal signing of the accord.
Electrolux agreed a four-year investment plan of 150 million euros ($206 million) that will save the sites in Porcia, Forli, Solaro and Susegana and maintain salary levels without compulsory layoffs, although 800 jobs will go through voluntary redundancies and early retirement.
Electrolux will in exchange be given tax breaks, amounting to 15 million euros a year, which the government extends to employers offering so-called “solidarity contracts”. Such contracts allow employers to put workers on reduced hours to protect jobs. The local government of the northern Friuli region is also offering cuts in the Irap business tax.
The struggle over Electrolux has highlighted the weakness of the electrical appliances sector in Italy, once a major producer of white goods, which has seen its output cut in half since 2006 under mounting pressure from lower cost locations.
CGIL, Italy’s largest union, welcomed the agreement which it said showed the need for similar deals elsewhere.
“It is more necessary than ever to identify incentives through accords with unions that bind companies to measures that protect jobs and production,” the union said in a statement.
The deal with Electrolux gave Prime Minister Matteo Renzi some encouragement less than two weeks before European parliamentary elections, even if it came on the same day as data showing Italy’s economic output fell unexpectedly in the first quarter.
Renzi has promised a broad range of structural reforms to revive Italy’s stagnant economy but with unemployment at record levels of around 13 percent, he could ill-afford the loss of another high-profile manufacturing employer.
As well as burdensome and complicated bureaucracy, companies have long complained of excessive costs in Italy, which has some of the highest corporate taxes in the world.
Renzi is planning a major overhaul of employment law in the coming months and on Thursday parliament approved measures aimed at making it easier for companies to use temporary workers.
Writing by James Mackenzie; editing by Keiron Henderson