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Editorial: And now for the hard part, BenQ

BenQ Corp's (明基) announcement that it was acquiring a cellphone unit of German electronics giant Siemens AG last week was a declaration of the handset maker's ambition to become one of the world's leading players in the mobile phone industry.

Judging from the high-spirited and vigorous remarks by chairman Lee Kun-yao (李焜耀) and president Sheaffer Lee (李錫華) at a press conference about the deal on June 7, linking with the Siemens brand should send a strong message that they want to bring BenQ to the world and earn fatter profits in the long run.

According to the agreement, BenQ will be running the BenQ-Siemens co-brand over the next five years. After that, the company will run its own brand. Most significantly, this deal is not only free, but even achieved with a bonus, because Siemens is actually paying BenQ 250 million euros to take over its money-losing cellphone business and will spend another 50 million euros to get a 2.5-percent stake in BenQ in the near future.

The government clearly welcomed the deal to elevate Taiwan's own brand names. Minister of Economic Affairs Ho Mei-yueh (何美玥) praised it a landmark deal that showed not just how smaller and less-known BenQ moved to take over an industry giant that has larger scale and market presence in the world, but would also earn Taiwanese brands world recognition.

But as the old saying goes, there is no such thing as a free lunch. The real challenge lies in how BenQ is going to manage a 6,000-strong workforce in Siemens' cellphone division, half of which based in Germany, in addition to its existing 14,000-strong workforce in Taiwan, China, Malaysia and Mexico.

While BenQ has agreed to take over the Siemens workforce through 2006 at existing contractual conditions, the company is non-committal about what will happen after 2006.

In this sense, the issue of whether the deal has been done at a fair value is less important than how the company plans to cut back on costs to stay competitive given that it is restrained by labor contracts which Siemens signed with workers last June.

Unlike their counterparts in Taiwan or elsewhere in Asia, workers in Europe have a higher awareness of their interests, and are backed by powerful unions. Although a booming economy and growing market give BenQ and other Taiwanese firms an edge in striking deals with foreign firms, these companies will have to respect the concept of labor rights if they plan to shut down facilities or lay off workers abroad.

In fact, what BenQ will face in Europe is a new labor-employer environment, which the company probably is not used to, or is less used to, in Taiwan, according to an official at the European Chamber of Commerce Taipei (ECCT). An official at the German Trade Office in Taipei also reminded BenQ and other Taiwanese companies planning to set foot in Europe that maintaining a good relationship with labor unions is crucial to their businesses there. The official stressed that labor unions enjoy extensive acceptance in European society, and are also very influential institutions that have a bearing on political decisions.

In Europe, the concept of labor rights -- that workers can mobilize and negotiate collectively -- is widespread and respected by the general public. But in Taiwan, the lack of public education about labor rights has caused many people to treat workers' demonstrations as confrontational matters, and regard labor unions and labor movement activists as troublemakers.

Therefore, when BenQ and other firms in "Taiwan Inc" are thinking of pursuing a serious move up the global corporate ladder, the biggest step yet in such an expansion will require more than their manufacturing skills or their ambitious investment to buy brands that can succeed. It will require them to adjust their mindset and perform as an international player, subject to certain global citizenship responsibilities.
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