Mass dismissals and use of low-paid subcontractors

By Harald Eraker
Norwatch

- I have worked here for ten years, and I have never been paid the legal minimum wage. It is impossible for my family and myself to live off the wage here. Therefore, we have to borrow money at 20% interest rate. Sometimes all we can afford to eat is dried fish. If only Mustad could increase the payment for our products so that we could get higher wages, says Joy Jimenez.

She works together with 35 other emplyees, mainly women, in the company Kapit-Bisig, half an hour's drive from Mustad's factory outside Manila. For ten years, Jimenez has tied loops on fishing lines and fishhooks.

Jimenez and the other women normally work six days a week, nine hours a day. But when Mustad has large orders, they work extra hours at night and on Sundays.

Mustad pays badly
- Mustad pays us by the piece for the job we do for them. Those who work fast, can make a daily wage of 140-150 pesos for the best-paid jobs, while the least experienced workers only make 60-70 pesos a day for the lowest-paid jobs, says Raymonda Sarita, the manager and co-owner of Kapit Bisig - the Norwegian company's subcontractor for the last ten years.

The legal minimum wage is 198 pesos per day (approximately 43 Norwegian kroner). According to Sarita, this is unattainable for the workers at Kapit-Basig. He blames Mustad for this:

- To manage to pay the workers the minimum wage, Mustad must pay us far more for the job we do for them. I have told them this many times. But apart from a one pesos increase of the price on our products, we have not heard anything from them, says Sarita, showing NorWatch a copy of a letter to Mustad.

"In fact, we should have dismissed more workers at our factory, but so far, we have only laid off 50."
Acting managing director of O. Mustad & Søn in Gjøvik, Norway, Hans H. Mustad.

Afraid
If Mustad does not receive enough orders, Kapit-Bisig's workers are sent home with a meager 30 pesos per day. Even the boss, Sarita, shakes his head over this.

- I am afraid to lose my job. I am 39 years old. At this age it is impossible to find a new job. Here in the Philippines, only women between 18 and 25 are in demand. Tying knots and loops on the fishing lines wears out our eyesight and health, says Jimenez.

Kapit-Basig's "factory premises" is a private house where the workers sit around small tables in the different rooms. Trade union is an unknown concept to them. The boss smiles, saying that the only purpose of a trade union would be to put pressure on Mustad to make them pay Kapit-Bisig more for the work they do.

Unknown
Nobody from the Norwegian management was present at the Mustad factory when NorWatch paid it a visit this summer. To acting managing director Hans H. Mustad in O. Mustad & Søn in Gjøvik, Norway, the troublesome working conditions at the company's subcontractors is completely unknown.

- No, I do not know anything about the conditions of our subcontractors. I have checked this out with our people in the Philippines, and their contact with the subcontractors only consists of carrying out quality controls, says Mustad. He says that production equivalent to 10-15% of the sales value is carried out by subcontractors in Manila.

- With the ups and downs of orders, we have to use subcontractors. It is easier to have them as buffers than our own regular employees. In addition, the cost of having things produced by them is 20% lower than at our own factory. If you are offered something cheaper, you don't turn it down. In this business, competition is fierce. But we are not happy that some of our subcontractors' workers earn less than the legal minimum wage, and we will discuss this with the suppliers, the Mustad director continues.

"I have worked here for ten years, and I have never been paid the legal minimum wage. It is impossible for my family and myself to live off the wage here. Therefore, we have to borrow money at 20% interest rate. Sometimes all we can afford to eat is dried fish. If only Mustad could increase the payment for our products so that we could get higher wages."
Joy Jimenez, worker at Kapit-Bisig, Mustad's subcontractor.

Dismissed
- In fact, we should have dismissed more workers at our factory, but so far, we have only laid off 50, says Hans Mustad, stressing the critical financial situation for the company in the Philippines.

Dismissals of workers and the use of subcontractors have become disputed issues in the company. The trade union of the employees who work at the assembly line, Mustad Terminal Tackle Philippines Workers and Employees Association (MTTWEA), is very critical towards the juggling of the staff:

- In the last years, they have repeatedly claimed that Mustad's financial results are bad. Last year, they used this explanation as they dismissed 250 workers. At the same time, we see that they put out jobs to subcontractors, and that we are told to work extra hours. We have no choice, because we know that if we say no, the jobs go to the subcontractors, and that our own jobs are further weakened. Therefore, they do not have to force us to work extra hours - they are very clever, says Cristina Pablo, head of the executive committee of MTTWEA.

She has worked at the assembly line in the Mustad factory for eight years, where flies, spinning baits and other equipment for sport fishermen in Europe and North America is hand made.

Pressured
Today, the Mustad factory has 381 employees, according to head clerk Wendy Rostad. Three years ago, the number of employees was almost 700. When mass lay-offs were announced in 1997, the trade union tried to prevent it.

- We notified the management that we would go out on strike to protest against this. But the management visited the homes of the workers who had been given notice of dismissal, and convinced them to accept the final payment they were offered. Thus, there was no strike, says Pablo.

From the start and until recently, the Mustad factory has been led by managing director Karl K. Meyer. NorWatch has had access to the manuscript of a speech which he gave to the junior directors - or "all of you in the Mustad family", as he writes, in April 1996. The speech says that Mustad's investors in Norway have invested about 10 million US$ in the Philippines, and that this is a lot of money. But, according to Meyer, the surplus has lately only been 3% after tax. This causes impatience among the investors:

"I am now being put under pressure to obtain a better return on invested capital because by freeing the money tied-up in our operations, placing the funds in an investment in the money market, one could obtain easily  10 to 15% more without having all the aggravation of running a complicated operations such as ours; without having people problems and without having to be afraid of losing at all by political or economical changes."

Will not accept
"The problems" with people are discussed by Meyer at a later point in the speech. He says that he sees dangerous signs of an insecure future, which may lead to the closing down of the factory:

"The dangers I can see are as follows", he writes, and lists the workers' demands of higher wages, more overtime pay, and more holidays pay, the workers' lower production compared to earlier (the reason he gives is that the older workers set a bad example), and certain elements of the staff who are not cooperative.

"I will not stand for this, I will not see the ship that I am guiding being beached by non competence, by non cooperation, by selfishness", writes Meyer. He then reminds the junior directors that they have to show the investors in Norway that they are competetive (referring to the fact that labour is cheaper in China, Vietnam and Indonesia). In the end, he asks everybody to read and think through his speech once again and to come back with a will to cooperate and make Mustad succeed.

"If there are anyone of you who is unwilling to take this challenge, we will gladly accept your resignation, because we cannot afford to have people on our team who are unwilling to cooperate and unwilling to share our vision for a company that is the best there is".

"We appeal to you to stop the diversion of works or at least stop your people in the Philippines from doing it and from mass dismissing the employees of Mustad TTP who have served you well through these years".
Letter from the trade union to the Mustad management in Norway.

Hard work
Since Meyer gave his speech, hundreds of workers have been sacked, and recently another fifty have been laid off. The trade union leaders are not happy about the content of the speech, which they had not seen until NorWatch showed it to them.

- It is not true that we work slowly. We are always in a hurry and we work hard, often with a lot of overtime and short breaks, even though it is strenuous to sit by the assembly line all day. Is a wage increase of three pesos too much to ask for, asks Cristina Pablo, who says that with only 5 pesos more than the legal minimum salary of 198 pesos (approximately 40 kroner) they have difficulties providing for their families, and they often have to borrow money to survive.

The workers have to wear working clothes with "Mustad - the Fishhook people" written on their backs.

- But we do not feel that we are part of the Mustad family when the management has this attitude towards us, says Rosita Calindas.

Hans H. Mustad, on the other hand, says that they are very concerned about the working conditions in the factory:

- The workers' salaries are, on average, 15% above the legal minimum wage, and we have our own cafeteria, doctor and nurse in the factory, he says. He is surprised that NorWatch has been told that they only get 5 pesos more than the minimum wage.

Shared bed
He gets less comfortable when we raise the issue of Karl Meyer's wife. Rosario Q. Gonzalez-Meyer established, through her own company KREXIM Inc., two companies located near Mustad's factory gates. By coincidence, her companies, Aqua Strike and Catchline, also produce fishing gear.

- We are aware of this, and it has not been favourable to us. But Karl Meyer is not working for Mustad anymore, and Jens Christian Markmanrud has taken over as managing director. This has not been easy for us, because even if Mrs. Meyer's companies produce many products that are not in direct competition with ours, they also make some of the same products, Hans H. Mustad explains diplomatically.

However, Karl Meyer has not left Mustad completely. He is still a member of the board, Mustad admits. The workers are not happy about Mr. and Mrs. Meyer's double role. Many of them tell that Aqua Strike and Catchline have operated as subcontractors to Mustad, and that the companies have taken over machines and equipment from the Norwegian company.

"If there are anyone of you who is unwilling to take this challenge, we will gladly accept your resignation, because we cannot afford to have people on our team who are unwilling to cooperate and unwilling to share our vision for a company that is the best there is".
Managing director Karl Meyer in a speech given to the junior directors of the Mustad factory in 1996.

Dismissed
The Aqua Strike story ended in May this year. By reference to the company's poor financial results, it was declared bankrupt. According to the workers, however, there was another reason for it:

- In 1996 we took the initiative to establish a trade union. Mrs. Meyer's response to this was not positive. She threatened that if we established the trade union, she would have to close the factory, but if we did not, we would stay friends. After we founded the union, she even told us at a meeting that we were evil, says former workers at Aqua Strike.

In 1998, Gonzales-Meyer started a new company, Aqua Sharp, which was to be the beginning of the end of Aqua Strike. The most loyal workers from Aqua Strike were given jobs in the new company, which also produces fishing equipment. Slowly, Aqua Strike was given fewer jobs, and in May this year, the company was declared bankrupt.

- We were shocked and angry when we got the message. Now, a month later, we still have not been paid, and we have to borrow money to get by, say the workers.

- The story of Aqua Strike is unknown to me and the present management of Mustad in the Philippines. Earlier, we used Mrs. Meyer's companies as subcontractors, but not anymore, says Hans H. Mustad.

Like rubber bands
According to the workers at Mustad, the management there disliked that the workers organised trade unions.

- Karl Meyer said to me: Why are you doing this to me? We have to get organised to improve the conditions here. We are like rubber bands, they stretch our working capacity the way they want, says one of the junior managers. He does not dare to tell his name:

- I cannot say what I want. I have five children to support. Maybe I can save other workers by speaking out, but it may cost me my job, he explains.

The production workers' trade union does not have the same fear to speak out. In March last year, they sent a letter to the Mustad management in Norway, in which they raise the issues of subcontractors, low payment and dismissals. They end the letter with the following appeal:

"We appeal to you to stop the diversion of works or at least stop your people in the Philippines from doing it and from mass dismissing the employees of Mustad TTP who have served you well through these years".

- But they still have not replied, says Rosario Calindas and Cristina Pablo from MTTWEA. Hans Mustad says that he does not know anything about the letter from the trade union, and asks NorWatch to send him a copy of it.

- Of course we will answer. The present management does not have a problem with the workers getting organised. We have a good experience from co-operation with responsible trade unions in other parts of our activity, he says, adding that they employ many people in the Philippines whom they offer favourable terms.

- But orders and profitability have not been satisfactory, and we have been forced to adjust costs, among other things by reducing the workforce, acting managing director Hans H. Mustad explains.

Norwatch Newsletter 13/99