Hungary's manufacturing sector increasingly facing "hidden" redundancies, unions claim

Some companies will take anything from a toy assembly to survive the car market downturn,

said Melinda Mészáros, president of the League Trade Unions, in response to a request from Portfolio. She stressed that orders continue to stall.

In the meantime, there were companies that were producing for stocks, hoping that demand would pick up. "Some of the stocks have become unmarketable," said Melinda Mészáros, explaining the difficult situation.

For the moment, there is no light at the end of the tunnel. Industry contracted in December, with the output of the automotive and electrical equipment sectors (including battery production) falling further.

Total new orders in the observed manufacturing sectors fell by 14.6% compared with December 2023.

New domestic orders fell by 2.6% and new export orders by 15.7%. Total order books at the end of December were 14.3% down on a year earlier, according to the Hungarian Central Statistical Office (KSH).

With so few new cars to be produced, this is unsurprisingly not having a positive impact on employment in the industry. Zsolt Kozma, vice-president for competition at the National Federation of Workers' Councils, says that a wage increase is a big achievement for any car company now, because the sector as a whole is facing a 15-20% drop in production.

Looking at the market as a whole, the automotive industry is not expected to perform well this year either,

Zsolt Kozma added.

This is explained by several factors. "In addition to the development of electric cars, a significant expansion of the charging network is still to come, but the general uncertainty over the war in Europe is also driving buyers to save money, which is why not only electric cars, but also hybrids and conventional cars are not being bought as much of the new cars," he said. "And if all that wasn't enough, the tariff increases the US President has pushed through could completely redraw the market," he added. He pointed out that the money invested by many European companies in electromobility is still struggling to be recouped.

Melinda Mészáros said that there is a "concealed" downsizing going on in the car industry. "The collective redundancies are not being used. "'Temporary workers are being handed back, fixed-term contracts are not being extended, retirees are being let go," she listed. Some companies have halved their workforce in recent years, he added. And in some car companies, many workers are on downtime.

In November last year, 797,000 people worked in the industry, according to data from the Central Statistical Office (KSH), a significant drop from the 815,000 seen a year earlier.

"As the group redundancies start at 30 people, people are being sent out in numbers below that," said Zsolt Kozma. In some cases, people were commuting in from 50-60-70 kilometres away, using company bus services. Sometimes it is enough to stop these services for reasons of economy, and the workers who use them will leave on their own because they can't get to work. Another typical solution is to reduce production from 3 to 2 shifts or to work 4 days instead of 5. According to Zsolt Kozma, in this case workers can stay, but they earn less in proportion to the reduction in working hours.

Cover photo (for illustration purposes only): Getty Images