Search This Blog

Wednesday, 14 December 2011

Bearish news from The Netherlands: mass lay-offs at various Dutch and international companies.

Regular readers of my blog might think that I’m a perma-bear that enjoys to bring you bad news. The former is partially true, but the latter definitely not.

In general entrepreneurs have the habit of being overly optimistic, as they are overrating their chances for success and continuity, while underrating the consequences of the credit crisis for the whole Euro-zone and The Netherlands. While often thinking that other companies will suffer from the credit crisis, entrepreneurs see their own company as immune for the consequences of an enduring period of austerity.

Governments on their behalf tried to stem the tides of this crisis by adopting one new policy after another. Remember QE1+2 and the EU/US alphabet soup of government measures that should have contained the initial mortgage debt crisis. Most of these measures didn’t solve the problems, but only postponed the financial/economic effects of them.

The Dutch government, for instance, reacted in 2008/2009 to the credit crisis by saving the Dutch banks, while multiplying the state-debt to 60% of GDP and by instating the Part-time Unemployment Benefit (PUB) policy to help companies getting through the crisis.

The former can be considered a (very costly) success: of the five Dutch system banks in the year 2008, ING Groep NV (ING), ABN Amro, Rabobank, Fortis-bank and SNS Reaal NV (SR), perhaps only the Rabobank would have survived without government support

The success rate of the latter (the PUB) is much more questionnable.The PUB policy was aimed at helping companies with keeping personnel in service that otherwise would have been laid off, by taking over 50% of the wage-payments in exchange for an educational programme. 

The thought behind this policy was that Dutch personnel would be scarce again in a few years when the crisis would be over, due to the general aging process and especially the coming retirement of the large Dutch baby-boom generation.

However, in my opinion the Part-time Unemployment Benefit caused companies to maintain personnel that should have been laid-off after all. Not laying off personnel maintained at these companies the overcapacity that emerged in 2008, when the credit crisis set in after years of conspicuous consumption. The sad fact is that this operation of laying off excess personnel started yet in 2011 and will definitely increase in 2012 (see the rest of the article).

But also the opposite happened in Europe: where governments should have acted decisively and vigorously, they didn’t act at all.

The Dutch government and other Euro-zone governments saw the Greek debt problem change from a smouldering and very well containable campfire into a blazing forest fire that is spreading throughout the whole Euro-zone, while destroying everything that comes on its path.

And the problem of moral hazard in the banking world is far from being solved yet in the US, the UK and Europe. To put it even stronger: where the banking world feared a substantial haircut on Greek debt only one month ago, the problem vanished into thin air at the last EU summit of December 8. The European taxpayers will keep on footing the bill for the irresponsible lending behavior of the European banks.

In this world where there are more opinions than stars in the sky, I just want to show you the situation in The Netherlands and Europe as-is: without government propaganda and wishful thinking, but also without an anti-Euro and anti-EU bias. That the tone of voice of my blog is more bearish than bullish, is because of the fact that the financial/circumstances have been more bearish than bullish over the last three years.

The following collected news messages are from today’s newspaper Het Financieele Dagblad (, except for the first message that is about one week old and comes from a local news site ( It shows that the European debt crisis is gaining momentum currently.

At NXP Semiconductors (NXPI), the former Philips subsidiary in the Dutch city of Nijmegen, 300 people will be laid off in the near future. Two of the company’s plants in Nijmegen will be closed by 2013. According to the producer of semiconductors these factories generate insufficient yields. NXP is aiming at production in a different plant. This plant produces more complex semiconductors for a.o. the auto industry.

In 2008 the company already fired 1300 people, due to a reorganization. Last year, however, new employees were hired again;mainly temp workers.

Labor Union CNV Professionals is unpleasantly surprised by the news. The union FNV Bondgenoten also questions the purpose and necessity of these lay-offs. The unions wanted to have quick consultations with the NXP management. About 3500 people work at NXP The Netherlands, of which 2000 in Nijmegen.

300 jobs lost and counting…

The ICT service company Logica PLC (LOG) scraps 450-550 jobs in The Netherlands and Belgium, after it sees market circumstances deteriorate. The company expects in 2012 a return to profitability in the Benelux (Belgium, Netherlands and Luxemburg).

The British-Dutch company Logica stated this on Wednesday December 14 in a intermediate press release, where it speaks of deteriorating market circumstances and customers reducing assignments. In reaction to this news the share dropped by 10.9% after 30 minutes of trading

The company stated that it will speed up an earlier announced reorganization and will scrap a total of 1300 jobs; most in The Netherlands and Belgium. Besides that, it will abolish half of its Commercial Real Estate in these countries.

575 jobs lost and counting (presuming an equal split in job losses between The Netherlands and Belgium)…

The Vlissingen, Zeeland-based, Dutch aluminium producer Zalco has defaulted, causing 600 employees to lose their jobs.

The company that already had been in big financial trouble for a few years, was declared bankrupt yesterday by a judge at the District Court in Middelburg. At Zalco work 480 people with fixed contracts and 130 temp workers. The personnel have been informed by the management. The company already had to scrap 140 jobs in 2008 and made use of the Part-time Unemployment Benefit (PUB) policy in 2009.

1175 jobs lost and counting… This example proves once again that the PUB only ‘helped’  companies to postpone the inevitable and weakened these companies in the process.

The Eindhoven-based Dutch truck manufacturer DAF (a subsidiary of US-based truck company PACCAR (PCAR)) reduces once again production volumes. A few hundred temp workers lose their jobs as a consequence.

This was announced by DAF in an internal memo to the personnel. According to CEO Harrie Schippers of DAF, many transporting companies postpone the purchase of new trucks, due to the uncertain economic circumstances and the Euro-crisis. This results in a much lower demand for trucks.

How the production at DAF will develop, depends on the market demand, according to the management. ‘ The peculiar circumstance is that shipping activities are still at a very high level in Europe’, according to Schippers in his memo to the personnel. ‘ Trucks are still sold, but many transporting companies are restrained to make large investments’.

At the end of 2008, DAF had to deal with a dropping demand, as a consequence of the credit crisis. Sales dropped sharply during these months and the whole 2009, but in 2010 – after scrapping a number of jobs and the introduction of the Part-time Unemployment Benefit(PUB) – an economic recovery followed. The truck manufacturer now feels once again the consequences of the crisis.

1375 jobs lost and counting. Once again there is a dubious role for the PUB, as it helped to maintain a situation of overcapacity in the Dutch manufacturing industry.

And these were only the Dutch companies that are currently reducing their excess personnel. Also bricks-and-mortar travel agent Thomas Cook Group PLC (TCG) and France-based manufacturer of nuclear power plants Areva SA (AREVA) announced lay-offs of personnel today. 

The reasons for these companies firing people, however, have less to do with the credit crisis than with a changing business environment for both companies. Thomas Cook definitely seems to lose the battle against the online travel agents and Areva still suffers heavily from the reduced interest for nuclear energy since the Fukushima catastrophy.

Still, in my opinion and that of many others, the 2010 economic recovery was totally artificial. None of the structural problems (overcapacity(!)) were solved and governments only dropped billions of Euro’s and Dollars into the economy, trying to spur it into recovery.

Now, due to the euro-crisis, the economic effects of this helicopter-drop of money have waned and the overcapacity is still present at the various manufacturers. Therefore these companies start to reduce their production capacity after all; sometimes voluntarily, but mostly out of necessity.

And I don’t expect a quick recovery this time, as there still seems to be a lot of overcapacity within Europe and it is very doubtful whether demand will return soon to 2006-levels. One thing is certain; the demand from the PIIGS-countries is not likely to return to 2006-levels soon and the same might apply to consumption in the stronger Euro-countries. Therefore expect much more bad news in the coming months.

No comments:

Post a Comment