As yet, it is uncertain which regions of Digital Equipment Corp’s worldwide business will take the brunt of the 20,000 job cuts it announced at the end of June. Some press reports have speculated that Europe, because it accounts for about 50% of DEC’s non-US revenues, half of those cuts will come from Europe. What those reports fail to mention, however, is that, although European sales total approximately 50% of DEC’s $8,300m in international revenue, it counts less than one third of its total staff. A Digital Europe spokesman in Geneva says the organisation counted about 24,000 staff out of a world total of 77,800. As a result, says Digital France’s spokeswoman, we are still trying to figure out what this means for us. Brad Allen, director of investor relations in Maynard, says the cuts will be a function of the needs of the business in the various geographies, which means customer needs and, in part, the region’s revenues and profit. Figures on precisely how much each country in Europe contributes to DEC’s revenue are scarce; the only information available comes from Germany. Combined revenues for Digital Equipment GmbH and Digital-Kienzle Computersysteme for 1993 were equivalent to $1,595m with a net loss of $65m, compared with 1992 revenues of $1,664m and a net loss of $117m. Ultimately DEC will likely achieve the staff reductions in Europe it requires, but recent events with its unions in Germany and France demonstrate the increasing difficulty of the task in a climate where unemployment has reached critical proportions.

Intransigent union

A company spokesman is, in fact, optimistic, noting that the organisation has cut approximately 5,000 of 6,000 jobs that had been slated for elimination this year. We have been working with the local works councils and social plans, so we know how to deal with that to achieve our goals, he said. Nonetheless, a more intransigent union leadership in France will require DEC’s management to come up with alternative solutions to layoffs, and a pending court decision in Germany, if lost, will increase the cost of staff reduction considerably. Digital France had its first confrontation with the new union leadership early last month, when its plan for eliminating 446 jobs was annulled by a court in Evry, the suburb of Paris where the company is located. The court, called in by the union, found a lack of evidence to corroborate Digital’s assertion that one third of the employees concerned had been given job reclassifications required by law. Daniel Guez, secretary general of the central laboor-management committee at Digital France, asserts that the reclassifications were, in fact, never made; that DEC never intended to lay off 446 people, but only the 300-odd that it had laid off at the time of the court’s decision. By announcing that the restructuring involves 446 posts, it allows them to say they effected 30% job reclassifications, he said. In response, a Digital France spokeswoman says they were made and then cancelled at the time of the court decision, moving those people back into their original posts. The plan was similar to three others over the last five years; neither was it the largest 1992 saw 630 jobs affected, with 380 actual layoffs. The difference, says Guez, is that the committee is now unionised and requires more stringent justification from management for job cuts. For the future, says Guez, the committee’s modus operandi is zero unemployment. Currently, the two groups are negotiating the adoption of a work-hour reduction scheme proposed by the Ministry of Labour.

By Marsha Johnston

The programme would have DEC, the government and the employee sharing equally the cost of reducing Digital France employees’ work week. Approximately 3,000 people in France working four days a week instead of five would save 600 posts, and it costs them a lot less [than layoffs], Guez said. Work-time reduction is one of several programmes the company is exploring to try and avoid layoffs, says DEC’s spokeswoman. She adds, I don’t think anyone can predict that another socia

l plan will necessarily be found in conflict with the French justice system and be taken before the court. The economic necessity of this last plan was not contested by the court. She acknowledged, however, that the context in France is particularly touchy economically. Across the Rhine, Digital Equipment GmbH could also soon find a court invalidating its decision to cancel its labour agreement, which cost it $253m in fiscal 1994. We wanted to discuss with the works council a new social plan that we could afford, because the previous one was 70% higher compensation than the industry average, says company spokeswoman Theresia Wermelskirchen. German law recognises two different types of labour contract – a Tarifvertrag, which is between the employer and union members representing the national informatics industry, and a contract with works councils, which are elected associations of strictly DEC employees. As a result of its purchase of Mannesmann-Kienzle, Digital GmbH had both types of contract in house, a Tarifvertrag for Digital-Kienzle and individual contracts with the various regional work councils for Digital Equipment. Last year, says Wermelskirchen, DEC tried to exchange Kienzle’s Tarifvertrag for the works council accords it had in the other side of the company. But, given the threat of impending layoffs, its employees preferred the outside authority that is involved in a Tarifvertrag, and, thus, DEC’s existing contracts with its works councils were incorporated into the Tarifvertrag. The hybrid Tarifvertrag, now covering employees at both Digital GmbH and Digital-Kienzle, contained the formula from the works council accords, dictating how much an employee would be paid on departure. That formula cost Digital Germany an average of $125,000 for each departing employee in fiscal 1994, an amount it decided it just could not afford with the new restructuring requirements. The company may have thought it justified, but the decision was patently risky. The labour contract would have been in effect until the end of this calendar year and such a cancellation has occurred only one other time in German history, the spokeswoman said. Given the lack of precedent, the works council may have a bigger chance of winning the case, she said, adding that the company is trying to negotiate a settlement before the court decision, but it’s difficult. Since the end of fiscal 1993, the combined staff of Digital Equipment and Digital-Kienzle has dropped from 6,304 to about 4,800. It has targeted a reduction to 3,900 by the end of this calendar year, but that number is likely to be revised downward in the context of the new restructuring.

Aware of the costs

Some of the employees scheduled to depart this year had already signed under the previous Tarifvertrag, before June 30. For the rest, people are waiting for the court decision. But, if someone negotiates now an agreement for, say one half of the previous package, and the court decides we have to stay with the old accord, they would get the rest of the money, she notes. In that case, she said, Digital GmbH would end up taking a bigger share of the restructuring money that the parent company has set aside. Ingrid Ohmann, from DEC’s law firm Droste in Munich, is more optimistic. I think it’s open because there is no federal court or even local court precedent on the legal consequences of such a summary cancellation. It’s one reason why the union is not too anxious for a decision, she says. Ms Ohmann says Digital has a strong case for why it had to cancel the contract; it remains to be seen whether the court will allow the cancellation to take immediate effect. Allen says DEC has accounted for every contingency in Europe, even losing the lawsuit, so as not to be forced to make bigger cuts elsewhere in the world, such as the US: We have looked at and are fully aware of the costs of restructuring in Europe and have taken what we believe are realistic assumptions in the geographies where restructuring activities will take place.