Hungary’s Car Workers Desperate as Gas, Recession Threaten Jobs

By Zoltan Simon

Jan. 9 (Bloomberg) -- It’s 10 a.m. on a Thursday and Janos Oklos would normally be on the assembly line, installing dashboards at Suzuki Motor Corp.’s factory in northern Hungary.

Instead, he’s in his slippers, taking out the garbage at the hostel where he and 300 co-workers live in sight of the car plant in Esztergom. A natural-gas shortage caused by the dispute between Russia and Ukraine, forced the factory to close until next week, raising concerns about jobs cuts a month after Suzuki said it was reducing the local workforce by 20 percent.

“I saw the faces when we were told we didn’t have to work this week,” said Oklos, 42, dressed in jeans and a white shirt. “They had desperation written all over them.”

The gas crisis is a further blow to companies that were already shedding workers to cope with the global economic crisis. At least 20 countries have lost supplies this week as Russia and Ukraine fight over prices and allegations that fuel is being illegally siphoned off.

Hungary, which in October secured 20 billion euros ($27.4 billion) in loans from the International Monetary Fund, European Union and World Bank to avert a default, may shed as many as 100,000 jobs in the slowing economy, raising unemployment by about a third, according to Prime Minister Ferenc Gyurcsany. The country’s jobless rate averaged 7.8 percent in the three months through November.

The economy contracted in the third quarter and falling industrial output, which dropped at an annual rate of 10.1 percent rate in November, pushed the country toward a recession. Declines in output were led by production cuts at carmakers, including Suzuki and Volkswagen AG’s luxury brand, Audi AG.

‘Forced Vacation’

The gas dispute erupted when OAO Gazprom, Russia’s gas exporter, offered to sell Ukraine natural gas for $250 per 1,000 cubic feet this year, up from $179.50 in 2008. Ukraine said $201 would be fair. Gazprom first cut supplies to Ukraine through an international pipeline, then suspended transit flows after accusing Ukraine of siphoning off gas bound for other countries.

Gazprom’s Jan. 7 decision forced countries including Hungary, Slovakia and Bulgaria to restrict gas use by companies.

Suzuki shut the Esztergom plant the same day and told workers to return next week, spokeswoman Viktoria Ruska said.

“No one wants to stay at home on a forced vacation if that means earning less money at the end of the month,” Zsuzsa Keresztessy, a Suzuki employee, said in a phone interview.

Hungary relies on imports from Russia for 80 percent of its gas, compared with the European Union average of 25 percent. Forty percent of the economy is powered by natural gas, according to the Energy Ministry.

The double-punch of gas shortages and the global credit crunch dashed Hungary’s economic recovery after growth slowed to a 14-year low for of 1.1 percent in 2007. The economy will probably shrink 1 percent this year, the government says.

Bankruptcies Rise

“The gas crisis will accelerate the rate of bankruptcies and liquidations,” Tamas Pletser, a Budapest-based energy analyst at ING Groep NV, said in a phone interview. “Many companies were already looking to cut jobs or halt production anyway. The gas crisis will be a good excuse to do so.”

Hungary reported a record 11,504 liquidations last year, 17 percent more than in 2007, according to company data provider Opten Kft. Thirty percent of the filings came in the fourth quarter.

The bankruptcies are costing jobs and reducing consumer spending two years after the government raised taxes and cut energy subsidies to reduce the budget deficit, sapping disposable income. Retail sales dropped for the 21 months through October.

“People are buying less and less,” said Judit Horvath, a flower vendor in downtown Esztergom, where red and green one- story houses line the street. “Those who used to buy three flowers now just buy one and spend the rest on heating and food.”

Falling Orders

Others just want to keep their jobs.

Suzuki, Japan’s second-largest minicar maker, in November announced plans to eliminate 1,200 of its 5,500 jobs in Esztergom because of falling orders worldwide. The cuts also affect Slovakians who work at the factory, which is located just across the Danube River that divides the two countries.

As the gas crisis forced the plant to shutdown, the fear of losing their jobs was on the minds of the dozen Suzuki workers huddled in the bar of the workers’ hostel for beers and a smoke as the car factory loomed silent down the road.

Asked about the first word that came to mind on their day off, they said in unison: “Insecurity.”

To contact the reporter on this story: Zoltan Simon in Budapest at zsimon@bloomberg.net.