EN

EN EN COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, xxx SEC(2009) 1379 final

COMMUNICATION TO THE COMMISSION

on application EGF/2009/007 SE/Volvo received from Sweden for a financial contribution from the European Globalisation Adjustment Fund

EN EN COMMUNICATION TO THE COMMISSION

on application EGF/2009/007 SE/Volvo received from Sweden for a financial contribution from the European Globalisation Adjustment Fund

Sweden submitted application EGF/2009/007 SE/Volvo for a financial contribution from the European Globalisation Adjustment Fund (hereinafter "EGF"), following the redundancies in three production sites of Volvo Cars and in a further 23 sites of companies which are either suppliers, or supplied by, Volvo Cars.

1. The application was received by the Commission on 5 June 2009.

2. In accordance with Article 2 of Regulation (EC) No 546/2009 of the European Parliament and of the Council amending Regulation (EC) No 1927/2006 on establishing the European Globalisation Adjustment Fund1, the application was assessed on the basis of Regulation (EC) No 1927/2006 of the European Parliament and of the Council of 20 December 2006 on establishing the European Globalisation Adjustment Fund2 as amended by Regulation (EC) No 546/2009.

3. The application meets the conditions for deploying the EGF as set out in Article 2(a) of Regulation (EC) No 1927/2006 and was submitted within the deadline of 10 weeks referred to in Article 5 of that Regulation.

SUMMARY OF THE APPLICATION AND ANALYSIS

(a) Analysis of the link between the redundancies and the global financial and economic crisis:

4. The application relates to 4 687 redundancies in 28 manufacturing sites in the Swedish automotive sector. Of this total number of 4 687 redundant workers, 3 126 had registered with the Public Employment Service.

In order to establish the link between the redundancies and the global financial and economic crisis, Sweden argues that the crisis has affected the automotive sector particularly severely, citing the Commission Communication of 25 February 2009 on responding to the crisis in the European automotive industry3. As the nature of the current crisis is global, all markets are affected, and there are few, if any, growth areas left to make up for the steep decline in most countries. Volvo Cars, owned by the global Ford Motor Corporation, is exposed to the problems facing the US car market, which has been particularly seriously affected. The current difficulties in access to credit are another major concern to Volvo Cars and its suppliers, as regards both production and sales, since potential consumers are now limited in their access to funds.

1 OJ L 167, 29.6.2009, p. 26 2 OJ L 406 of 30.12.2006, p. 1 Regulation as corrected in OJ L 48, 22.2.2008, p.82 3 COM(2009) 104 final.

EN 2 EN The suppliers to Volvo Cars are heavily dependant on this main enterprise, since in most cases around 80 percent of their output is produced for this company.

5. In conclusion, the opinion of the Commission services is that the 4 687 redundancies in 3 production sites of Volvo Cars and 23 production sites of its suppliers can be linked, as required by Articles 1 and 2 of Regulation (EC) No 1927/2006, to the global financial and economic crisis, which has led to a substantial decline in demand for cars, as well as considerable difficulties in access to liquidity and credit.

(b) Demonstration of the number of redundancies :

6. Sweden submitted this application under the intervention criteria of Article 2(a) of Regulation (EC) No 1927/2006 which requires at least 500 redundancies over a four- month period in an enterprise in a Member State, including workers made redundant in its suppliers or downstream producers.

7. The application is based on the 3 126 registered redundancies in Volvo Cars and 23 of its suppliers and downstream producers. The dates on which these workers became redundant lie within the four-month period between 1 December 2008 and 31 March 2009. Company No. Volvo Cars, Gothenburg 1,931 Volvo Cars, Olofström 304 Volvo Cars, Skövde 23 Pininfarina Sverige AB, Uddevalla 69 International Automotive Components Group Sweden AB, Tidaholm 52 IAC Group Sweden AB, Gothenburg 49 IAC Group Sweden AB, Färgelanda 183 IAC Group Sweden AB, Skara 36 Autoliv Sverige Aktiebolag, Vårgårda 109 Finnveden Powertrain AB, Trollhättan 50 Finnveden Powertrain AB, Allvesta 82 Finnveden Metal Structures AB, Olofström 142 Finnveden Metal Structures AB, Forsheda 44 Arvika Gjuteri, Arvika 191 Lear Corporation Sweden Aktiebolag, Trollhättan 7 Lear Corporation Sweden Aktiebolag, Gothenburg 88 Fehrer Sweden AB, Ed 87 Semcon Caran AB, Gothenburg 268 Semcon Caran AB, Lund 15 Etteplan Tech AB, Gothenburg 50 Etterplan Tech AB, Trollhättan 13 Nya Segerström & Svensson AB, Eskilstuna 243 Plastal AB, Gothenburg 299 Plastal AB, Uddevalla 48 Plastal AB,Simrishamn 243 Plastal Group AB, Mölndal 61 Total 4,687 ~ of these, registered with the Employment Service 3,126

EN 3 EN 8. It is the opinion of the Commission services that the total of 3 126 redundancies in Volvo Cars and 23 of its suppliers and downstream producers during the four-month reference period is sufficient to comply with the criteria of Article 2(a) of Regulation (EC) No 1927/2006.

(c) Explanation of the unforeseen nature of those redundancies:

9. The global financial and economic crisis led to a rapid decrease in demand for cars worldwide. The decline in demand, which started in 2008, was unforeseeable for the Swedish government, and happened at an unprecedented rate and speed, as the financial crisis unfolded. Previous business cycles had been slower and more regional in nature, making it possible for the car industry to adapt in an orderly manner. In the current crisis, on the other hand, markets have been hit simultaneously all over the world, affecting both consumer demand and access to credit.

10. Volvo Cars, as part of the global Ford Motor Corporation with its core business in the USA, where the car market has been most severely affected, is particularly hard hit by the decline in cash-flow and the shortage of credit. In the circumstances, it decided on a substantial reduction in production capacity, including its workforce. As its suppliers are heavily dependant upon Volvo Cars, as well as being directly hit by the financial crisis themselves, they have been in the same dilemma and, of the 26 production sites mentioned above, the last five have declared bankruptcy.

(d) Identification of the dismissing enterprises, suppliers or downstream producers, sectors, and the categories of workers to be targeted:

11. The application concerns 4 687 workers dismissed from the 26 production sites, of whom 2 258 were dismissed by Volvo Cars. The supplier companies laid off between 7 and 299 workers per site.

Of the workers dismissed, 3 126 have been registered by the Public Employment Service. The Swedish authorities estimate that some 1 500 workers will take up the offer of the EGF package.

Of the 3 126 workers registered, 72 % are male and 28 % female. 82 % are EU citizens, while 18 % are not. By far the largest proportion, i.e. 82 %, belong to the 25 to 54 years age group, 6 % are over 55 years old and 12 % are under 25 years of age. In terms of professional categories4, 23 % are machine tool operators, 18 % car builders, 10 % mechanical engineers, 9 % mechanics, 8 % truck drivers, 7 % stockroom staff, 4 % Masters of Engineering and 4 % administrators, 3 % robot operators and 2 % salespersons, while the remaining 13 % are classified as "others".

As for the targeted 1 500 workers, the same proportions are maintained.

(e) Description of the territory concerned and its authorities and stakeholders:

73 % of the redundancies occurred in the NUTS II region Västsverige. While this region is close to the national average in terms of per capita GDP, it has been

4 Categories based on the International Standard Classification of Occupations, 1 digit, (ISCO-88)

EN 4 EN suffering from an increase in bankruptcies by 43 % during the first quarter of 2009 as compared with the same quarter of 2008. Layoffs during the last quarter of 2008 and the first quarter of 2009 were almost nine times higher than during the same period a year earlier.

The automotive industry is the single most important industrial cluster in Sweden. In 2007, over 77 000 people were employed in the automotive sector, of whom 39 000 worked in the county of Västra Götaland. A new report has calculated that a total of 60 000 to 70 000 workers are employed in the broader automotive industry (with its suppliers in other sectors) in that county, which equals some 8 to 9 % of its total employment.

(f) Expected impact of the redundancies as regards local, regional or national employment:

12. The region of Västsverige is suffering not only the redundancies from Volvo Cars, but also those from Saab and Volvo AB5 and their suppliers. The number of unemployed workers in March 2009 was 60 % higher than in March 2008. In some municipalities, the redundancies from the automotive industry represent a high percentage of total employment, e.g. in Färgelanda (8.1 %), Olofström (6 %) and Dals-Ed (4.2%).

13. The Swedish authorities estimate that 1 000 job losses in the automotive industry would entail further indirect redundancies of 1 600 in the business and trade sectors, as well as in transport, construction, private services and haulage. In addition, the highly developed R&D sector would also be affected, as the automotive industry is responsible for 16 % of Sweden's R&D expenditure.

14. In conclusion, in these circumstances, the redundancies can be seen to have a significantly negative effect on the local and regional economy.

(g) Co-ordinated package of personalised services to be funded and a breakdown of its estimated costs, including its complementarity with actions funded by the Structural Funds:

15. The Swedish authorities have estimated that, of the 3 126 workers potentially eligible to participate in the EGF measures, about 1 500 are most in need of assistance. The EGF package of measures is therefore designed for the 1 500 workers to be targeted.

The emphasis is to help workers switch to new employment or to starting their own businesses, by developing their competence to match the skills required for the new activity. The Swedish authorities will strive to make sure that a potential new employer or a potential business idea is already in place when the worker starts the package of tailor-made measures.

Another priority is that of "generation change", i.e. making sure that younger workers are coached by older workers about to reach retirement age, so as to provide for valuable skills being passed down to the next generation while the older

5 Volvo AB is the Swedish mother company in a global concern manufacturing heavy vehicles and similar products. Volvo AB sold Volvo Cars to Ford in 1999.

EN 5 EN generation is still in place and available to do the training, coaching and mentoring. These new skills are obtained by spending time at the workplace, together with the mentor, in the occupational segment where the worker is likely to find a new job.

16. The following types of measures are proposed, all of which combine to form a co- ordinated package of personalised services aimed at re-integrating the workers into the labour market. The measures go beyond those that can be financed through job security agreements, national labour market policy or with ESF support; they are efforts that would not have been possible without the help of the EGF.

17. The following measures are proposed as part of the EGF package :

– Guidance : This is offered to all 1 500 participants as a first measure as soon as they register with the Public Employment Service. The guidance includes information on available jobs, on skills and training requirements, on available training programmes and trainee support schemes, as well as mobility grants. As the guidance lays the groundwork for the whole EGF package, the advice and counselling offered here will be more in-depth, with much more time will be allocated to the individual needs of each participant, than would be possible under the standard provisions.

– Training and retraining and generation change : This measure will provide training on an individual scale for new competence in new jobs. As the workers are likely to have to leave the automotive industry, they will need to prepare for other sectors where there is a demand for people with the relevant skills. A wide range of training opportunities will be offered, with a longer time period than could normally be made available. Where possible, this measure will be combined with generation change, where a redundant worker will be mentored by an older and experienced worker. About 1 000 workers will participate in this measure.

– Entrepreneurship promotion : Participants who wish to start their own businesses will be given special information and guidance on how to "sell" their plans and how to acquire the necessary funds to get the business started. Some 235 participants will be offered this opportunity.

– Aid for self-employment : Participants who are already preparing to start a new business will be trained in laws governing business life, such as taxation, accounting and labour law for employers, as well as labour safety and environmental issues. About 100 participants are expected to take this training.

– Preparatory training : Participants who need preparatory training in order to take part in the more advanced upskilling measures, will be offered special training in any subjects they need to this end, depending on the qualifications and experience they already hold. Some 165 participants will be offered this opportunity. The preparatory training is estimated at twelve months per participant.

Allowances are not included in the EGF package, as these will be covered separately.

18. The administrative expenditure, which is included in the application, in accordance with Article 3 of Regulation (EC) No 1927/2006, covers preparatory activities, management, information and publicity and control activities. These activities include translation of documents, adaptation and implementation of information

EN 6 EN systems, information to the participants, a conference, as well as management and control measures.

19. The personalised services that are part of the co-ordinated package presented by the Swedish authorities are active labour market measures falling within the eligible actions as defined in Article 3 of Regulation (EC) No 1927/2006. The Swedish authorities estimate the total costs of these services at EUR 15 137 960 and the administrative expenditure at EUR 650 000 (= 4.3 % of the total amount). The total contribution requested from the EGF is EUR 9 839 674 (65 % of the total costs).

Actions Estimated Estimated cost Total costs number of per worker (EGF and workers targeted national targeted (in EUR) cofinancing) (in EUR)

Personalised services (Article 3(1))

Training and retraining and 1 000 8 947 8 947 000 generation change

Entrepreneurship promotion 235 5 605 1 317 175

Aid for self-employment 100 5 965 5 965 500

Preparatory training 165 11 929 1 968 285

Guidance 1 500 1 106 1 659 000

Subtotal personalised services 14 487 960

Technical assistance for implementing EGF (Article 3(3))

Preparatory 10 000

Management 300 000

Information and publicity 140 000

Control activities 200 000

Total administrative expenditure 650 000

Total estimated costs 15 137 960

EGF contribution (65 % of 9 839 674 total costs)

20. As regards the complementarity with actions funded by the Structural Funds, Sweden submits that this can be optimised by virtue of the fact that the managing authority is

EN 7 EN the same for both the EGF and the European Social Fund (hereinafter "ESF"). Double funding will be prevented by means of ESF checklists which will be adapted to take account of the EGF operations.

(h) Date(s) on which the personalised services to the affected workers were started or are planned to start:

21. Sweden started the personalised services to the affected workers included in the co- ordinated package proposed for co-financing to the EGF on 15 December 2008. This date therefore represents the beginning of the period of eligibility for any assistance that might be awarded from the EGF.

(i) Procedures for consulting the social partners:

22. Ever since notices of termination in Sweden started to increase in the summer of 2008, the Public Employment Service has had continuous contacts with the relevant trade union organisations and employers to discuss what measures should be offered to those given notice who would be needing help.

In the course of these contacts, the social partners expressed a wish for in-company training measures. While the Swedish Public Employment Service has been positive about such training, with the goal of helping the redundant person find work in another sector, a lack of resources has hindered implementation so far.

23. The Swedish authorities confirmed that the requirements laid down in national and Community legislation concerning collective redundancies have been complied with.

(j) Information on actions that are mandatory by virtue of national law or pursuant to collective agreements

24. As regards the fulfilment of the criteria set out in Article 6 of Regulation (EC) No 1927/2006 the application provided the following elements:

• The Swedish authorities confirmed that the financial contribution from the EGF does not replace measures which are the responsibility of companies by virtue of national law or collective agreements.

• The Swedish authorities have given assurances that the actions provide support for individual workers and are not to be used for restructuring companies or sectors.

• The Swedish authorities confirmed that the eligible actions referred to under points 14 and 16 above do not receive assistance from other Community financial instruments.

25. Management and control systems

Sweden has notified the Commission that the financial contribution will be managed and controlled by the Swedish ESF Council. Sweden has confirmed that the principle of separation of functions among and within the relevant departments will be respected.

CONCLUSION

EN 8 EN 26. In conclusion, for the reasons set out above, it is proposed to accept application EGF/2009/007 SE/Volvo submitted by Sweden relating to the redundancies in Volvo Cars and 23 of its supplying sites, as evidence of a direct and demonstrable link has been provided that these redundancies result from the global financial and economic crisis. A co-ordinated package of eligible personalised services has been proposed. Therefore, it is proposed to mobilise the EGF in response to Sweden's application.

FINANCING

The total annual budget available for the EGF is € 500 million. So far, two cases have been accepted for funding in 2009, and a further five cases have been proposed, amounting to a total of EUR 22 276 574.

Article 12(6) of Regulation (EC) No 1927/2006 states that on 1 September of each year, at least EUR 125 million should remain available in order to cover any needs arising until the end of the year.

After deduction of the amounts already accepted or proposed for commitment, an amount of EUR 477 723 426 remains available.

It is proposed to deploy EUR 9 839 674 from the EGF.

THE COMMISSION IS THEREFORE INVITED TO:

– conclude that the conditions for a financial contribution from the EGF to application EGF/2009/007 SE/Volvo submitted by Sweden are met;

– submit to the budgetary authority a proposal to authorise commitment appropriations corresponding to EUR 9 839 674, as specified in point 19, as well as a request for the transfer of this amount in commitment appropriations to budget line 04.0501 (European Globalisation Adjustment Fund) in accordance with Article 12(3) of Regulation (EC) No 1927/2006;

– authorise the transfer of the identical amount in payment appropriations from budget line 04.0217 (European Social Fund (ESF) – convergence) to budget line 04.0501 (European Globalisation Adjustment Fund).

EN 9 EN