Nokia 'astonished' by German bank's retribution for plant layoffs

Massive public protests last month against Nokia's decision to move one of its major manufacturing facilities from Germany to Romania did little to stir the company. But a recall of federal subsidies by a leading bank there has apparently stirred the giant.

The gulf between Germany and Finland-based cell phone maker Nokia only grew wider today, as the company has now become the epitome of that country's growing outsourcing problem. Bochum, located in the westernmost state of Nordrhein-Westfalen (NRW), is where Nokia operates a key manufacturing facility that has already seen massive layoffs, and which now Nokia plans to close. One of the country's leading financial institutions for business development, NRW Bank, is also located there.

This morning, NRW Bank and the state government there formally requested that Nokia return the €41 million (about $60 million) in federally approved subsidies received in 1998 and 1999, for failing to maintain factory hiring levels the company had promised to maintain at the time.

According to Deutsche Welle today, the NRW state legislature contends that since 2002, Nokia has failed to maintain its factory hiring levels by as many as 400. But the matter was apparently tabled until late last year, when Nokia made a decision to move its manufacturing facilities to Romania. The move sparked massive public protests, including a call from leading opposition leaders in parliament's SPD party to boycott Nokia products.

"Nokia is astonished by this," reads a statement from the company this morning. "Based on the facts available to the company and Deutsche Bank, its adviser throughout the entire period, both parties strongly feel that such an attempt is without merit."

Deutsche Bank, Nokia says, already turned over to NRW Bank documents the company says prove its factory generated more than enough jobs to fulfill the quota, implying that all of its hires over a multi-year period taken collectively meet the state's requirements for subsidy. Other documents, the company says, show that the company already invested €350 million in the Bochum plant, which is where the €41 million went, and then some.

Having heard about enough from his country's wayward former partner, German Finance Minister Peer Steinbrück published an editorial in this morning's Frankfurter Rundschau that, translated into English (with some help from Google and our own German-speaking Tim Conneally), compared Nokia's executives with the managers of Chinese mines.

German finance minister Peer Steinbrück

Using what we've determined to be very astutely suggestive language, Minister Steinbrück wrote something very similar to the following: "We've known this for quite a while: The capital [Berlin] is an innocent doe, searching itself for the best place to graze," implying that often times, Germany's head is in the wrong place.

"But we also know that globalization is an irreversible process," Steinbrück continued, regaining some measure of composure. "And not everyone knows that the leader in world exports and foreign investment is adding substantial profits to its bottom line, right under Germany's most prominent [nose]."

From there, Steinbrück launched right into Nokia. "No fewer than 4,000 workers, with their high skill, their motivation, and their flexibility, contributing greatly to the success of this global market leader in Finland -- out on the streets. And despite a profit of €7.5 billion in fiscal 2007! For years, Nokia had collected a total of €88 million euros in subsidies. All of that no longer matters now, not because the plant had lost money, but because it didn't make enough profit! Meanwhile in Romania, there's fresh money to be made, and the labor costs are lower."

So the Nokia caravan packs up and moves to the fair oasis of Cluj and Jucu in Romania, the finance minister continued. In so doing, he argued, the company abandoned its responsibility to be a socially stabilizing force in those regions where it does business. Sure, governments can't be expected to squeeze private industries into becoming utopian, socially responsible providers for everyone in the name of globalization, but doesn't the concept of globalization mean that businesses should pay attention to the role they play in the world at large, and how their position in it affects it as a whole, he put forth.

Nokia contends it paid far more in taxes to the city of Bochum than it ever received in subsidies. "The increase in average annually paid local taxes to the city of Bochum as well as state and federal taxes," reads Nokia's statement this morning, "was also close to the total amount of subsidies received during the whole period."

While the arguments continue, Nokia proceeds with plans to ramp up its Cluj plant to 3,500 employees. Meanwhile, construction remains scheduled to begin on the Jucu plant in July, according to the Romanian business news service Ziarul Financiar, with plans to begin full production early next year, at a cost to Nokia of about €60 million.