Share the Work, Share the Cash - Mondragon Coops Surviving
Europe's Job and Credit Crunches

Mondragon coop gets credit-wise to beat the crunch

By Amanda Cooper - Reuters

Sharenet (South Africa)
June 28, 2012

http://www.sharenet.co.za/news/Mondragon_coop_gets_creditwise_to_beat_the_crunch/ed1b6913a5bdfa4300e5e0f1e13bb6ce

MONDRAGON, Spain, June 28 (Reuters) - As the financial crisis
seeps ever deeper into Spain's economy, pushing unemployment
to 18-year highs and drying up business funding, a cooperative
group in the Basque country has found a way to keep the cash
flowing.

Cooperatives, unlisted and owned by their members, are, in
this region in northern Spain, touted as nimble operations
that can more easily adjust to changing conditions, more
willing to take salary cuts or move staff around when
necessary to preserve jobs.

"We are the owners; we have to tighten our belts, cut our
salaries, or whatever, to keep our jobs and not disperse like
many private companies that stop investing here," said Mikel
Lezamiz, a senior director at Mondragon, the world's largest
cooperative and Spain's fourth largest employer.

The Mondragon group - more than 130 cooperatives, including a
major supermarket chain, a savings bank and manufacturers
making myriad products, from washing machines and car parts to
machines that fabricate solar-panels - has also come up with a
solution to the credit crunch. Pooling cash.

A property crash has left Spain's banks in need of up to 100
billion euros in European aid, and the country's sovereign
bond yields have climbed to their highest since the launch of
the euro nearly 14 years ago. Banks that are focused on
increasing their capital to weather the storm have choked off
lending to companies.

So Mondragon and its network of coops - headquartered in the
town of the same name in the green, hilly heart of the Basque
Country - are bypassing the banks by sharing their spare cash.

"Back in the '70s it was standard practice (for coops) to swap
people; we've always done that. But transferring cash from one
coop to another, we'd never done that before. Each coop had to
sort itself out, going to the banks, asking for credit lines
and so on," Lezamiz said.

When the euro zone crisis began to unfold in May 2010 with
Greece's first bailout, companies around Europe found that the
trillions of emergency dollars injected by central banks to
heal the 2008 credit crisis were wearing off.

To avoid any part of the group defaulting on payments to
suppliers or delaying wage payments, Mondragon asked its coops
to funnel spare liquidity from one to another.

"At first, it was tough to convince them to give cash to one
another, and now it's par for the course," Lezamiz said.

"When you think that we can transfer people - who need
training, who might feel an affinity for their own cooperative
- elsewhere, that process should be more complicated than
sending half a million euros from A to B."

LIQUIDITY POOL

With nearly 100,000 employees and 343 million euros in
operating profit last year, the group has a strong emphasis on
training, as well as research and development and a bustling
export market, traits that define many Basque companies.

Indeed, the industry-heavy Basque economy has outperformed
Spain's national economy fairly consistently for the last few
years, and even though it has not escaped the recession, it
still has the lowest unemployment in the country, at just over
half the nationwide rate of nearly 25 percent.

Mondragon is an export-led business. Around 70 percent of its
production is exported to 149 different countries, but Lezamiz
said performance varied greatly within the group because some
companies were more exposed to the struggling home economy.

Fagor, a leading maker of kitchen appliances that exports to
about 130 countries but still relies heavily on the domestic
market, has cut production of its washing machines by more
than half, and its workers agreed almost unanimously to take a
7.5 percent paycut.

Meanwhile, Mondragon's supermarket chain, Eroski, is Spain's
third-largest and in May reported profits of 42 million euros
for its fiscal 2011 and has recorded a drop of 30 percent, or
just over 1 billion euros, in its overall debt levels over a
three-year period.

The name of the game right now is not creating jobs, it is
about maintaining them, Lezamiz said.

"People have to be at the centre, and their work is what must
have value attached to it. Capital, that is just a resource, a
tool."

(Additional reporting by Vincent West; Editing by Fiona Ortiz
and Will Waterman)

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