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Labor management will challenge BenQ: analysts

After BenQ Corp (明基) announced last week the deal to acquire Siemens AG's handset unit, industry watchers have warned that a real challenge facing the Taiwanese company is how to cut costs while managing the company's 3,000 workers in Germany in an environment of restrictive labor contracts.

Some others questioned whether BenQ can overcome enterprise and cultural differences, especially in management, which its chairman Lee Kun-yao (李焜耀) said will cost the company dearly.

Cultural differences were said to be one of the major reasons that caused Acer Inc's fizzle after acquiring Counterpoint Computers in the US in 1987, Altos in 1990, and failure to buy Siemens Nixdorf's PC department in 1998. BenQ spun off from Acer in 2001.

Although BenQ obtained experience in working with European partners by forming a US$20 million joint-venture named Philips BenQ Digital Storage (飛利浦明基儲存科技) with Royal Philips Electronic two years ago, the venture is headquartered in Taipei, and the company capital and size are far less than the billion-dollar Siemens cellphone unit based in Munich.

BenQ urgently needs to develop the capability to deal with the labor environment in Europe, where workers have more awareness of their interests and are backed by powerful unions, said Guy Wittich, chief executive officer of the European Chamber of Commerce Taipei (ECCT).

"I think what BenQ will face in Europe, of course, is the whole labor union organization and protection of labor rights, that's something they probably not used to, or less used to in Taiwan," Wittich said.

Disappointed workers

The immediate reaction to the BenQ-Siemens deal from German metalworkers union IG Metall was disappointment.

Although the move was expected, the union said it would have preferred if Siemens had kept the cellphone unit, and that employees now faced a much more uncertain future.

Half of the handset unit's 6,000-strong workforce is based in Germany.

The union will work to obtain guarantees for jobs in Germany after 2006. Under an agreement reached between the union and Siemens management last year, the jobs are only guaranteed until next year.

Siemens won a victory in one of Germany's landmark labor agreements in June last year, in which 4,000 workers at a Siemens cell phone factory in Nordrhein-Westfalen agreed to extend their working hours from the standard 35 hours per week to 40 hours at the same pay, in exchange for a guarantee of jobs until 2006. Siemens had threatened to move 2,000 jobs to Hungary.

BenQ's Lee has agreed to guarantee the jobs through 2006 on the terms of their existing contracts, but said it is too early to say what will happen to Siemens employees after that time.

Crucial relationships

Maintaining a good relationship with labor unions is crucial, said Christine Malpricht, Director of German Trade Office in Taipei.

Malpricht said that BenQ and other companies planning to oversee a large number of workers in Germany need to respect local traditions and circumstances as the first step in handling labor disputes.

"While labor unions enjoy extensive acceptance in European society, they are also very influential institutions and have a bearing on political decisions, a tradition dating back more than 100 years," Malpricht said.

Although labor unions can be powerful adversaries for employers during labor disputes, they can also be valuable allies by helping employers to deal with difficult situations, resolve certain problems or even implement substantial changes, Malpricht said.

"Therefore it is important for employers to keep a constant and productive dialogue with labor unions on an equal basis," Malpricht said, "It is not advisable for employers to treat unionists as inferiors ... any kind of hierarchical behavior will be counterproductive in this regard."

One of the most powerful means labor unions have to put pressure on employers is to call a strike, she said, adding that a strike is a legal instrument and can even stop a whole production process for an extended period of time.

No matter what's BenQ's decision on its German employees, it is just a beginning for the ambitious Taiwanese handset maker as well as a sign that more Asian high-tech upstarts want to set foot in western markets, following Lenovo Group Ltd's (聯想) acquisition of IBM Corp's PC division.

"I'm sure we are going to see more of the examples [of Asian enterprises buying or merging with overseas companies]," said the ECCT's Wittich.

"We receive Taiwanese multinational corporations, especially those in the high-tech industry, who request us to help find them business partners in Europe almost every week, so I think what we see is just a start," he added.
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