Explanatory Memorandum to COM(2021)207 - Globalisation Fund application from Germany - EGF/2020/003 DE/GMH Guss - Main contents
Please note
This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2021)207 - Globalisation Fund application from Germany - EGF/2020/003 DE/GMH Guss. |
|---|---|
| source | COM(2021)207  |
| date | 27-04-2021 |
CONTEXT OF THE PROPOSAL
1. The rules applicable to financial contributions from the European Globalisation Adjustment Fund (EGF) are laid down in Regulation (EU) No 1309/2013 of the European Parliament and of the Council of 17 December 2013 on the European Globalisation Adjustment Fund (2014-2020) and repealing Regulation (EC) No 1927/2006 1 (the ‘EGF Regulation’) 2 .
2. On 15 December 2020, Germany submitted an application EGF/2020/003 DE/GMH Guss for a financial contribution from the EGF, following redundancies 3 in GMH Guss GmbH in Germany.
3. Following its assessment of this application, the Commission has concluded, in accordance with all applicable provisions of the EGF Regulation, that the conditions for awarding a financial contribution from the EGF are met.
SUMMARY OF THE APPLICATION
| EGF application | EGF/2020/003 DE/GMH Guss |
| Member State | Germany |
| Region(s) concerned (NUTS 4 level 2) | Düsseldorf (DEA1) Arnsberg (DEA5) |
| Date of submission of the application | 15 December 2020 |
| Date of acknowledgement of receipt of the application | 15 December 2020 |
| Date of request for additional information | 28 December 2020 |
| Deadline for provision of the additional information | 8 February 2021 |
| Deadline for the completion of the assessment | 3 May 2021 |
| Intervention criterion | Article 4(1)(a) of the EGF Regulation |
Primary enterprise | GMH Guss |
Number of enterprises concerned | 1 |
| Sector(s) of economic activity (NACE Revision 2 Division) 5 | Division 24 (Manufacture of basic metals) |
Number of subsidiaries, suppliers and downstream producers | 4 |
| Reference period (four months): | 31 July 2020 – 30 November 2020 |
| Number of redundancies during the reference period | 585 |
| Total number of eligible beneficiaries | 585 |
| Total number of targeted beneficiaries | 476 |
| Budget for personalised services (EUR) | 1 730 731 |
| Budget for implementing EGF 6 (EUR) | 72 114 |
| Total budget (EUR) | 1 802 845 |
| EGF contribution (60 %) (EUR) | 1 081 706 |
ASSESSMENT OF THE APPLICATION
Procedure
4. On 15 December 2020, Germany submitted application EGF/2020/003 DE/GMH Guss, i.e. within 12 weeks of the date on which the intervention criteria set out in Article 4 of the EGF Regulation were met. The Commission acknowledged receipt of the application on the same day, and requested additional information from Germany on 28 December 2020. Such additional information was provided within six weeks of the request. The deadline of 12 weeks of the receipt of the complete application within which the Commission should finalise its assessment of the application's compliance with the conditions for providing a financial contribution expires on 3 May 2021.
Eligibility of the application
Contents
- Enterprises and beneficiaries concerned
- Intervention criteria
- Calculation of redundancies and of cessation of activity
- Eligible beneficiaries
- Link between the redundancies and major structural changes in world trade patterns due to globalisation
- Events giving rise to the redundancies and cessation of activity
- Expected impact of the redundancies as regards the local, regional or national economy and employment
- Targeted beneficiaries
- Eligibility of the proposed actions
- Estimated budget
- Period of eligibility of expenditure
- Complementarity with actions funded by national or Union funds
- Procedures for consulting the targeted beneficiaries or their representatives or the social partners as well as local and regional authorities
5. The application relates to 585 workers made redundant by four subsidiaries of GMH Guss GmbH. This enterprise operates in the economic sector classified under the NACE Revision 2 Division 24 (Manufacture of basic metals). The redundancies are located in the NUTS level 2 regions of Düsseldorf (DEA1) 7 and Arnsberg (DEA5) 8 . These sites are located in the Ruhr area, the traditional industrial region in North Rhine-Westphalia.
6. Germany submitted the application under the intervention criteria of Article 4(1)(a) of the EGF Regulation, which requires at least 500 workers being made redundant over a reference period of four months in an enterprise in a Member State.
7. The reference period of four months for the application runs from 31 July 2020 to 30 November 2020.
8. 585 workers were made redundant in GMH Guss during the reference period.
9. The redundancies during the reference period have been calculated from the date on which the employer, in accordance with Article 3(1) of Council Directive 98/59/EC 9 , notified the competent public authority in writing of the projected collective redundancies. Germany confirmed prior to the date of the completion of the assessment by the Commission that these 585 redundancies have actually been effected.
10. The total number of eligible beneficiaries is 585.
Link between the redundancies and major structural changes in world trade patterns due to globalisation
11. In order to establish the link between the redundancies and major structural changes in world trade patterns due to globalisation, Germany argues that the foundry industry in Germany is facing profound challenges such as changes in international trade in goods and services, as well as relocating activities to non-EU countries.
12. In metal casting foundries, metals are melted, and the liquid metals are cast into customised shapes. The process is highly labour-intensive. Foundries are usually casting metals when very complex shapes are needed. Metal casting foundries are classical suppliers for other manufacturing industries, in particular the automotive industry, as well as machine, construction, steel, energy, chemical and health technology industries. In Germany, the main customers of metal casting foundries are the automotive industry (60 %) and machine industry (26 %) 10 . As foundries are highly specialised and provide custom-made products for their clients, the activities of the foundries are highly dependent on demand by specific main customers.
13. Two subsidiaries of GMH Guss were suppliers to the automotive industry: one to car producers and the other to heavy truck producers. A third subsidiary was supplier to the machine industry, with a special focus on shipbuilding. A fourth subsidiary, as well as the parent company itself, were performing administrative services for the manufacturing subsidiaries.
14. Traditionally, metal casting foundries were built near their main customers, as a close cooperation was necessary to design the custom-made products, and due to the difficult transport of heavy products. Therefore, within Germany, the industry is primarily located in the traditional manufacturing regions. 25 % of the German cast metals are produced in North Rhine-Westphalia 11 .
15. Whilst, in 2019, Germany was the largest producer of metal casting products in the EU, producing more than twice as much as Italy, and three times as much as France 12 , Germany only had a share of 5 % of global production, behind China (45,5 %), India (11 %) and the USA (8,8 %).
16. As concerns the automotive industry as one of the main customers of the German cast metal foundries, world trade patterns have been changing drastically over recent years. Whereas in 2000, the EU was the world’s leading region, with 33 % of global car production, the EU’s world market share had dropped to 19 % by 2019. Due to the rising demand in the region, Asia now dominates in global car production by far, with a world market share of 54 % of global car production in 2019. For the first time in history, German car makers were producing more cars in China than in Germany. In total numbers, in 2019, car production dropped to the lowest level since 1996 13 .
17. As concerns heavy truck producers, the production of heavy trucks weighing more than 3,5 tons nearly halved in Germany, from 256 131 vehicles in 2008, to 133 997 in 2019. China is now dominating the world market with a market share of 40 % of global production, and, due to overproduction, is selling heavy trucks at highly competitive prices, undercutting the competitors, in many parts of the world 14 .
18. Furthermore, on the European market, a trend developed in the whole automotive industry to nearshore production or parts of the supply chain to Eastern Europe, including third countries. This is in particular the case for labour-intensive products, such as metal casting products. Lower environmental standards, in particular in non-EU countries, are a further reason for nearshoring of metal casting products 15 .
19. As concerns the shipbuilding industry, average yearly shipbuilding in Europe halved during 2011-2019 in comparison with 2002-2010 16 . With a market share of 84 %, Asian producers now dominate the world market 17 .
20. These globalisation-related challenges have put severe strains on the metal casting industry, leading to a 8,9 % decrease of overall metal casting production in Germany between 2018 and 2019 18 .
21. To date, the NACE Division 24 – Manufacture of basic metals has been the subject of six EGF applications, four of which based on trade related globalisation and two on the global financial and economic crisis 19 .
22. The events giving rise to these redundancies are the insolvency proceedings with respect to GMH Guss. Whereas one subsidiary, Dieckerhoff Guss GmbH, was closed down entirely, the others were partially closed and operate under insolvency administration. Out of a workforce of 1 000, 585 workers have lost their jobs. The public authorities were notified of the redundancies at Walter Hundhausen GmbH on 31 July 2020, at Dieckerhoff Guss GmbH on 24 September 2020, and for the remaining entities on 5 October 2020.
23. Whereas GMH Guss was already operating in a challenging business environment due to globalisation, its problems culminated when the main client of subsidiary Walter Hundhausen GmbH, responsible for 60 % of the subsidiary’s production, decided to nearshore parts of its supply chain to Turkey.
24. Furthermore, Taiwanese competitor MEITA opened two foundries in Obrenovac, Serbia. These foundries, highly subsidised by the Serbian government, launched production in 2017 and 2019, respectively, and produce, in particular, for the European automotive industry 20 . Due to subsidies and lower labour costs, MEITA was able to offer far lower prices than its German competitors. As a consequence, in 2019, the main automotive clients of GMH Guss’ subsidiary Dieckerhoff Guss GmbH demanded a price reduction of 30 %, that Dieckerhoff was not able to match. The loss of its clients, which then contracted out to the Serbian factories of MEITA, meant the end of Dieckerhoff Guss.
25. The social partners agreed on the creation of four transfer companies 21 , one for each subsidiary of GMH Guss. The transfer companies will be managed by BOB Transfer GmbH. 476 of the workers signed a tripartite agreement according to which they enter the transfer company upon the official end of their employment with GMH Guss or one of its four subsidiaries.
26. The EGF assistance will be used to complement the regular measures offered by the transfer companies and can also be used to extend the duration of the individual measures. 86 workers entered a first transfer company on 1 August 2020, the remaining workers started on 1 October 2020.
Expected impact of the redundancies as regards the local, regional or national economy and employment
27. The redundancies are expected to have a significant adverse impact on the local economy. The Ruhr area is a highly urbanised industrial area. Traditionally a coal-mining and steel producing region, the region has been facing tremendous structural challenges since the 1960s, with unemployment rates continuously above the average of North Rhine-Westphalia. The Covid-19 pandemic is having a further adverse impact on the labour market. Between September 2019 and September 2020, unemployment in North Rhine-Westphalia rose from 6,5 % to 7,9 %, and from 9 % to 10,7 % in the Ruhr area. Most of the workers made redundant are in the second half of their professional career, have a low level of qualification, and often a poor command of German language.
Targeted beneficiaries and proposed actions
28. The estimated number of redundant workers expected to participate in the measures is 476. The breakdown of these workers by sex, citizenship and age group is as follows:
| Category | Number of targeted beneficiaries | ||
| Sex: | Men: | 455 | (95,59 %) |
| Women: | 21 | (4,41 %) | |
| Citizenship: | EU citizens: | 291 | (61,13 %) |
| non-EU citizens: | 185 | (38,87 %) | |
| Age group: | 15-24 years: | 7 | (1,47 %) |
| 25-29 years: | 24 | (5,04 %) | |
| 30-54 years: | 269 | (56,51 %) | |
| 55-64 years: | 175 | (36,76 %) | |
| over 64 years: | 1 | (0,21 %) |
29. The personalised services to be provided to redundant workers consist of the following actions:
–Upskilling measures: These are offered following profiling and career guidance interviews. Courses can be provided individually or in groups. Considering the high number of participants with a migratory background, German courses will be offered to participants with a poor command of German.
–Peer groups / workshops: These will be group fora assisted by a facilitator, helping participants to exchange ideas and reflect on their experiences. Some peer groups focus on a common background of participants – such as participants with a migratory background, or older participants..
–Business start-up advisory service: This will comprise a package of advisory services for those interested in starting their own businesses. These services will include individualised tailor-made coaching measures, as well as the participation in group coaching sessions.
–Job search assistance: Professional job scouts will help to locate potential job vacancies that are not yet published, and which might suit eligible workers.
–Guidance counselling and vocational orientation: Based on the initial profiling interviews, guidance counsellors will not only inform about developments on the job market and possible career paths, but also provide applicants with motivational and inspirational help and support. Workers shall be encouraged to upgrade their skills or to learn new skills, and participate in education and training measures aimed at finding new employment, possibly in a different sector.
–International job counselling: For job seekers willing to accept a position in another EU member state, special counsellors will assist in job search, inform about work conditions in the respective member state, and help in getting qualifications translated and recognized.
–Follow-up mentoring: Workers can benefit from further counselling services after taking up new employment in order to facilitate transition into a new job and to minimise the risk of a job loss.
–Training allowance: The payment starts from the date when the worker enters the transfer company, and ends as soon as the person leaves the transfer company. Participation in active labour market measures is a prerequisite for receiving an allowance.
30. The measures organised are in line with Germany’s sustainability strategy.
31. In light of the Covid-19 pandemic, a sanitary hygiene concept has been developed to ensure the implementation of measures. This includes online courses, as well as adequate rooms for classroom courses 22 .
32. The proposed actions, here described, constitute active labour market measures within the eligible actions set out in Article 7 of the EGF Regulation. These actions do not substitute passive social protection measures.
33. Germany has provided the required information on actions that are mandatory for the enterprise concerned by virtue of national law or pursuant to collective agreements. They have confirmed that a financial contribution from the EGF will not replace such actions.
34. The estimated total costs are EUR 1 802 845, comprising expenditure for personalised services of EUR 1 730 731 and expenditure for preparatory, management, information and publicity, control and reporting activities of EUR 72 114.
35. The total financial contribution requested from the EGF is EUR 1 081 706 (60 % of total costs).
| Actions | Estimated number of participants | Estimated cost per participant (EUR 23 ) | Estimated total costs (EUR) 24 |
| Personalised services (Actions under Article 7(1)(a) and (c) of the EGF Regulation) | |||
| Upskilling measures (Qualifizierungsmaßnahmen) | 415 | 1 189 | 493 605 |
| Peergroups/workshops | 240 | 438 | 105 160 |
| Business start-up advisory service (Existenzgründerberatung) | 3 | 5 133 | 15 400 |
| Job search assistance (Beratung und Stellenakquise) | 476 | 517 | 245 968 |
| Guidance counseling and vocational orientation (Berufsvorbereitung und Orientierung) | 200 | 201 | 40 133 |
| International job counseling (Internationale Beratung) | 10 | 1 133 | 11 332 |
| Follow-up mentoring (Nachbetreuungsmaßnahmen) | 375 | 569 | 213 378 |
| Sub-total (a): Percentage of the package of personalised services | – | 1 124 976 | |
| (65 %) | |||
| Allowances and incentives (Actions under Article 7(1)(b) of the EGF Regulation) | |||
| Training allowance (Transferkurzarbeitergeld) | 476 | 1 273 | 605 755 |
| Sub-total (b): Percentage of the package of personalised services: | – | 605 755 | |
| (35 %) | |||
| Actions under Article 7 i of the EGF Regulation | |||
| 1. Preparatory activities | – | 7 211 | |
| 2. Management | – | 39 663 | |
| 3. Information and publicity | – | 3 606 | |
| 4. Control and reporting | – | 21 634 | |
| Sub-total (c): Percentage of the total costs : | – | 72 114 | |
| (4 %) | |||
| Total costs (a + b + c): | – | 1 802 845 | |
| EGF contribution (60 % of total costs) | – | 1 081 706 |
36. The costs of the actions identified in the table above as actions under Article 7(1)(b) of the EGF Regulation do not exceed 35 % of the total costs for the coordinated package of personalised services. Germany confirmed that these actions are conditional on the active participation of the targeted beneficiaries in job-search or training activities.
37. Germany started providing the personalised services to the targeted beneficiaries on 1 August 2020. The expenditure on the actions will therefore be eligible for a financial contribution from the EGF from 1 August 2020 to 15 December 2022.
38. Germany started incurring the administrative expenditure to implement the EGF on 1 November 2020. The expenditure for preparatory, management, information and publicity, control and reporting activities shall therefore be eligible for a financial contribution from the EGF from 1 November 2020 to 15 June 2023.
39. The sources of national pre-financing or co-funding are the Federal budget and Bundesagentur für Arbeit (Federal Public Employment Service). These fund the national contribution of 40 % of the total costs of EGF financed measures offered by the transfer company 25 .
40. Germany has confirmed that the measures described above receiving a financial contribution from the EGF will not also receive financial contributions from other Union financial instruments.
41. Germany set out that the EGF measures offered are complementing measures offered by the European Social Fund (ESF). The ESF Operational Programme for North Rhine-Westphalia co-finances some of the basic measures of the severance scheme (Sozialplan) agreed by the social partners. Germany confirmed that the EGF is not replacing any of these measures.
Procedures for consulting the targeted beneficiaries or their representatives or the social partners as well as local and regional authorities
42. Germany has indicated that the co-ordinated package of personalised services has been drawn up in consultation with all parties concerned, particularly the social partners. For the planning of the EGF-supported measures, the Federal Ministry of Labour and Social Affairs held talks with the PES and BOB Transfer GmbH on the scope for possible support from the EGF. From the very beginning, the social partners supported a possible EGF application. A monitoring committee was set-up to steer a possible EGF co-financed intervention. Besides representatives of the Ministry of Labour and Social Affairs, of the PES, and of the transfer company, the monitoring committee comprises representatives of the social partners, representatives of IG Metall trade union, the liquidators of the dismissing enterprise and its subsidiaries, as well as representatives of the works councils.
Management and control systems
43. The application contains a description of the management and control system which specifies the responsibilities of the bodies involved. Germany has notified the Commission that the financial contribution will be managed by the same bodies within the Federal Ministry for Labour and Social Affairs (Bundesministerium für Arbeit und Soziales) which manage the European Social Fund (ESF). Whereas the Gruppe Europäische Fonds für Beschäftigung acts as the managing authority 26 , the organisationally independent Organisationseinheit Prüfbehörde 27 is the control authority for these funds. These bodies also managed the previous EGF contributions to Germany. Some of the tasks of the EGF managing authority are permanently delegated to the PES by administrative agreement.
Commitments provided by the Member State concerned
44. Germany has provided all necessary assurances regarding the following:
–the principles of equality of treatment and non-discrimination will be respected in the access to the proposed actions and their implementation,
–the requirements laid down in national and EU legislation concerning collective redundancies have been complied with,
–GMH Guss, which has continued its activities after the lay-offs, has complied with its legal obligations governing the redundancies and provided for its workers accordingly,
–the proposed actions will not receive financial support from other Union funds or financial instruments and any double financing will be prevented,
–the proposed actions will be complementary with actions funded by the Structural Funds,
–the financial contribution from the EGF will comply with the procedural and material Union rules on State aid.
BUDGETARY IMPLICATION
Budgetary proposal
45. The EGF shall not exceed a maximum annual amount of EUR 186 million (2018 prices), as laid down in Article 8(1) of Council Regulation (EU, Euratom) 2020/2093 of 17 December 2020 laying down the multiannual financial framework for the years 2021-2027 28 .
46. Having examined the application in respect of the conditions set out in Article 13(1) of the EGF Regulation, and having taken into account the number of targeted beneficiaries, the proposed actions and the estimated costs, the Commission proposes to mobilise the EGF for the amount of EUR 1 081 706, representing 60 % of the total costs of the proposed actions, in order to provide a financial contribution for the application.
47. The proposed decision to mobilise the EGF will be taken jointly by the European Parliament and the Council, as laid down in point 9 of the Interinstitutional Agreement of 16 December 2020 between the European Parliament, the Council of the European Union and the European Commission on budgetary discipline, on cooperation in budgetary matters and on sound financial management, as well as on new own resources, including a roadmap towards the introduction of new own resources 29 .
Related acts
48. At the same time as it presents this proposal for a decision to mobilise the EGF, the Commission will present to the European Parliament and to the Council a proposal for a transfer to the relevant budgetary line for the amount of EUR 1 081 706.
49. At the same time as it adopts this proposal for a decision to mobilise the EGF, the Commission will adopt a decision on a financial contribution, by means of an implementing act, which will enter into force on the date at which the European Parliament and the Council adopt the proposed decision to mobilise the EGF.