TRAISKIRCHEN, Austria-Continental A.G.'s plan to cut production and employment at its Semperit Reifen A.G. subsidiary has sparked a political firestorm in Austria. Faced with calls, hearings and threats of a boycott of Conti-brand products, Conti has responded swiftly and bluntly, saying a boycott will hurt Traiskirchen's future as a Semperit manufacturing site.
``Those who want to retain jobs in Traiskirchen ... shouldn't play with fire,'' Conti warned in a terse statement.
Conti's warning, backed by a plea for reason from Semperit board member Bernd Bartha, came in response to a public call by Semperit's labor union and Austria's chamber of commerce for a consumer boycott of Continental products. The move protests the halving of Semperit's car tire manufacturing output. The cutback plan threatens 400 jobs at the plant this year and has been interpreted by labor representatives as a prelude to closure.
For the city of Traiskirchen and the region of Baden, the factory represents 2,300 jobs and a payroll of more than $50 million annually. All told, more than 10,000 residents in the region depend on Semperit directly and indirectly for their livelihood.
The cutbacks at the Traiskirchen unit are designed to reduce costs by as much as $33 million a year, Conti said earlier. With the exception of 1994, Semperit has operated in the black since Conti's takeover, and in each of the past two years, Semperit paid dividends of $40 million to the German parent.
Jorg Haider, head of Austria's right wing Freedom Party, has made the controversy a personal campaign and has called for a government investigation into the matter. Haider and others accuse Conti of steering Semperit toward insolvency to circumvent plant closure-related social costs, estimated at up to $350 million.
Austrian Chancellor Franz Vranitzky invited Conti Chairman Hubertus von Gruenberg and others to an August ``summit'' in Vienna on the future of Semperit.
Other points Conti emphasized in its statement:
Conti has invested $340 million in Traiskirchen in the past 10 years;
Conti and Semperit executive councils are preparing a social support program to soften the effects of the layoffs; and
Conti continues to entertain purchase offers for the factory, pledging to supply technology and buy back tires ``provided they are at competitive prices.''
Conti spokesmen also refuted the notion that the cutback in production of 2 million tires annually at Traiskirchen will be transferred to Barnum Continental in nearby Otrokovice, Czech Republic. The transfer statement can be attributed in at least one case to Semperit Managing Director Werner Kraus.
Labor costs at Barnum are only a fraction of those in Austria.
The situation is particularly delicate for Conti in light of investment projects and off-take agreements the company is involved with in China, the Czech Republic, India, Indonesia and Slovenia.
However, Conti emphasized that the cut in production capacity at Traiskirchen is for premium tires, and the capacity expansions at Barum and elsewhere are for tires in the ``rapidly growing budget brand segment'' where Conti intends to raise its market share.
Traiskirchen's dilemma stems largely from Semperit's loss of most of its lucrative original equipment business with Japan.
Before Austria became part of the European Union, the country had established a trade deal giving Japanese car makers access to the Austrian market, provided the Japanese vehicles contained a certain percentage of Austrian-made content.
This resulted in Semperit delivering as many as 2.4 million tires a year to Japan. Last year, however, that total fell to 500,000 units and probably will fall to 200,000 this year, Kraus said. Semperit probably won't deliver any next year, he said.