The Evolution of the Industrial Relations System in the Italian Shipbuilding Industry [1 ed.] 9781527502796, 9781527500051

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The Evolution of the Industrial Relations System in the Italian Shipbuilding Industry

ADAPT LABOUR STUDIES BOOK-SERIES International School of Higher Education in Labour and Industrial Relations Series Editors Tayo Fashoyin, University of Lagos (Nigeria) Michele Tiraboschi, University of Modena and Reggio Emilia (Italy) Author Alberto Sasco, Employee Relations Manager and Assistant for the HR Manager at Fincantieri’s plant in Monfalcone (Italy) English Translator Pietro Manzella, ADAPT Senior Research Fellow (Italy) ADAPT (www.adapt.it) is a non-profit organisation founded in 2000 by Professor Marco Biagi with the aim of promoting studies and research in the field of labour law and industrial relations from an international and comparative perspective. Its purpose is to encourage and implement a new approach to academic research, by establishing ongoing relationships with other universities and advanced studies institutes, and promoting academic and scientific exchange programmes with enterprises, institutions, foundations and associations. In collaboration with the Centre for International and Comparative Studies on Law, Economics, Environment and Work (DEAL) at the Marco Biagi Department of Economics, University of Modena and Reggio Emilia, ADAPT set up the International School of Higher Education in Labour and Industrial Relations, a centre of excellence that is accredited at an international level for research, study and the postgraduate programmes in the area of industrial and labour relations. ADAPT International Scientific Committee Bertagna Giuseppe (University of Bergamo, Italy), Bulgarelli Aviana (ISFOL, Italy), Fashoyin Tayo (University of Lagos, Nigeria), Frommberger Dietmar (Universität Magdeburg, Germany), Grisolia Julio Armando (Universidad Nacional de Tres de Febrero, Argentina), Hajdù Jòzsef (University of Szeged, Hungary), Kai Chang (Renmin University, China), Ouchi Shynia (University of Kobe, Japan), Quinlan Michael (University of New South Wales, Australia), Raso Delgue Juan (Universidad de la Republica, Uruguay), Ryan Paul (King’s College, University of Cambridge, United Kingdom), Sanchez Castaneda Alfredo (Universidad Nacional Autonoma de Mexico, Mexico), Sargeant Malcolm (Middlesex University, United Kingdom), Tiraboschi Michele (University of Modena and Reggio Emilia, Italy), Tucker Erick (York University, Canada).

The Evolution of the Industrial Relations System in the Italian Shipbuilding Industry By

Alberto Sasco

The Evolution of the Industrial Relations System in the Italian Shipbuilding Industry Series: ADAPT Labour Studies Book-Series By Alberto Sasco This book first published 2017 Cambridge Scholars Publishing Lady Stephenson Library, Newcastle upon Tyne, NE6 2PA, UK British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Copyright © 2017 by Alberto Sasco All rights for this book reserved. No part of this book may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the copyright owner. ISBN (10): 1-5275-0005-5 ISBN (13): 978-1-5275-0005-1

TABLE OF CONTENTS

Preface ........................................................................................................ ix Knowing the Past to Govern the Future Foreword .................................................................................................... xi CHAPTER ONE .............................................................................................. 1 THE RELATIONSHIP BETWEEN FINCANTIERI AND TRADE UNIONS IN STATE MAJORITY-OWNED COMPANIES 1. The Industrial Relations System in Italy’s Shipbuilding Sector in the context of Deregulation from the 1960s to the mid-1980s ..... 1 1.1. State-owned Companies’ Opt-out of Confindustria and the Conclusion of the INTERSIND ASAPT Protocol of 5 July 1962 ............................................................... 1 1.2. From “Articulated Bargaining” to “Non-binding Bargaining”: Italy’s Hot Autumn ..................................................................... 8 1.3. The 1970s: Economic Crisis and the Revival of Centralised Collective Bargaining ............................................................... 10 2. Developing a Regulated and Participatory Model of Industrial Relations: The 1984 IRI Protocol ................................................... 12 2.1. The Slow Restoration of Dialogue in Industrial Relations: The Economic Crisis and the Tripartite Agreements Concluded at the start of the 1980s ............................................................. 12 2.2. A New, Regulated Industrial Relations Model based on Dialogue and Cooperation: The IRI Protocol concluded on 18 December 1984 ............................................................... 16 2.3. The IRI Protocol and the Federmeccanica Document: Different Proposals, Same Goals .............................................. 20 3. Moving from Public to Private Ownership: New Industrial Relations Models in State Owned Companies ............................... 23 3.1. The Unsuccessful Implementation of the 1984 Protocol and the Conclusion of the New Protocol on 16 July 1986 ........ 23 3.2. The Industrial Relations System in State Majority-owned Companies at the start of the 1990s: Economic Crises and the Interconfederal Agreement of 21 February 1990 ......... 27

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3.3. The Evolution of the Industrial Relations System in Italy: The Protocol of 23 July 1993 and the Amalgamation of INTERSIND and Confindustria .......................................... 30 CHAPTER TWO ........................................................................................... 35 SUPPLEMENTARY COLLECTIVE BARGAINING IN THE SHIPBUILDING INDUSTRY 1. Economic Crisis and Business Restructuring: Collective Agreements concluded by Fincantieri in the 1980s ....................... 35 1.1. Reorganisations and Plans to Restructure the Shipbuilding Sector: The 1984 Reorganisation Plan and the Creation of Società Operativa Fincantieri ............................................. 35 1.2. From Reorganisation to Productivity-based Pay: The Agreement of 14 October 1986 ........................................ 45 1.3. Performance-based Remuneration Systems amid Improved Relations between Fincantieri and Trade Unions: The Agreement of 30 September 1988.................................... 50 2. Amendments to and Implementation of the New Variable Pay Scheme: The Agreements concluded by Fincantieri in the early 1990s .............................................................................................. 55 2.1. The Struggle faced by the Ship-repair Sector and the Legitimization of the Performance-based Remuneration System: The Agreement of 12 July 1990 .................................. 55 2.2. Employee Participation as a Starting Point for a New Variable Pay Scheme: The Agreement concluded on 9 April 1992 ........ 60 2.3. The Agreement of 4 April 1996: Productivity Growth, Innovation, and New Pay Arrangements .................................. 63 2.4. The 1999 Agreement and the Consolidation of Fincantieri’s Production Model ..................................................................... 65 3. Agreements concluded at the start of 2000: Revitalisation and Leadership in High Added-value Industries ............................ 67 3.1. From INTERSIND to FEDERMECCANICA: Fincantieri’s New Industrial Relations System following the Agreement of 28 October 2000 ................................................................... 67 3.2. Attempts to Privatise Fincantieri and Amendments to the Productivity-based Bonus: The Agreement of 15 June 2004.... 70

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CHAPTER THREE ........................................................................................ 75 SUPPLEMENTARY COLLECTIVE BARGAINING AT FINCANTIERI: FROM THE 2008 ECONOMIC RECESSION TO 2016 NEGOTIATIONS TO CONCLUDE A NEW COMPANY-LEVEL COLLECTIVE AGREEMENT 1. Supplementary Collective Bargaining as a Major Tool to Deal with the Economic Recession: The Company-level Collective Agreement of 1 April 2009 ............................................................ 75 1.1. The Shipbuilding Industry’s Economic and Production Growth in the 2000s ................................................................. 75 1.2. The Serious Economic Recession affecting the Shipbuilding Industry in 2008: Falling Demand and the Need for Restructuring ............................................................................ 80 1.3. Collective Bargaining as a Catalyst for Seeing to the Serious Recession hitting international markets: The Supplementary Collective Agreement of 1 April 2009 ..................................... 83 2. The Economic Crisis and Production Issues: The Reorganisation Plan of 2011 ................................................................................... 89 2.1. From 2010 to 2012: The Crisis lingers on in the Shipbuilding Sector ........................................................................................ 89 2.2. The Reorganisation Plan of 21 December 2011 ...................... 90 3. Market Recovery and the Search for New Forms of Operational Flexibility: Negotiations to Conclude a New Supplementary Collective Agreement at Fincantieri ............................................... 93 3.1. First Signs of Recovery in Worldwide Shipbuilding ............... 93 3.2. Negotiations to enter into a New Company-level Collective Agreement at Fincantieri .......................................................... 95 4. The Supplementary Collective Agreement of 24 June 2016 .......... 98 4.1. New Results-based Pay: Old and New Mechanisms to Assess Employee Performance ............................................ 98 4.2. New Forms of Occupational Welfare ...................................... 99 4.3. The long-awaited Review of the Remuneration System and the focus on Training and Outsourcing .............................. 99 4.4. The New Industrial Relations System: The Shift from More Dialogue to Higher Work Flexibility ...................................... 100 5. By way of Conclusion: Promoting Amicable Relations as a Key Element to give Fincantieri an International Reach ..................... 101 Bibliography ............................................................................................ 103

PREFACE1 KNOWING THE PAST TO GOVERN THE FUTURE

Alberto Sasco’s research into Fincantieri’s industrial relations system is scientifically relevant in that it serves as a powerful tool to understand the complex system of labour relations in place in Italy’s leading industrial groups. The originality of this work – which lies in the author’s refined analysis and critique – has prompted me to write this short preface and is illustrative of how talented young people like Alberto can become advocates of change and contribute to Italy’s progress. It is widely known that Napoleon Bonaparte availed himself of the services of officials with outstanding skills and “a lot of luck”. Alberto possesses both these qualities, as his internship at Fincantieri coincided with negotiations to review the collective agreement. Drawing on the Finmeccanica’s motto, I have used the word “review” rather than “renew”, because it was not a mere extension of a collective agreement, but an opportunity to promote a new culture as regards work organisation and remuneration, which also led to clashes with trade unions. Consequently, Alberto, who was at Fincantieri to carry out research, also took part in negotiations with unions, so that his analysis mingled with both words and action. Alberto’s youthful enthusiasm gives his work a determined, though measured, tone, which guides the reader through an extraordinary journey from past to future. After dealing with previous literature and scientific texts on the topics analysed, he adds a further element, perhaps the most important one, discussing a break with the past that future practitioners will, however, see as a sign of continuity between two eras. Alberto’s work makes him the ultimate repository of Fincantieri’s history of industrial relations, as he provides an excellent recollection of past, present and future events. The heart of Fincantieri’s industrial relations beats in Alberto’s chest and gives life to the new world. This is the essence of an ever-changing

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Marcello Sorrentino, Senior Executive and Vice President of Institutional and Industrial Relations at Fincantieri S.p.A. from 2014 – 2016.

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world: making attempts through approximation, knowing the past and adapting it to changing times. After all, this is the purpose of forward-thinking people.

FOREWORD

The aim of this work is to provide an in-depth analysis of how industrial relations in Italy’s shipbuilding sector have developed over the years, taking Fincantieri – the leading and well-known shipbuilding company – as a case study. To this end, an investigation of relevant literature and collective agreements has been carried out to understand how national and company-level collective bargaining has evolved in time. Part one of this research describes the industrial relations climate in shipbuilding between the 1960s and the 1980s and concentrates on a number of major events occurring at the time, among others the separation between private and state majority-owned companies in terms of employer representation. The attempt to seek dialogue to ensure growth of companies operating in this sector was a distinctive trait of relations between employers and trade unions. Part two is concerned with the main elements characterising collective bargaining entered into at Fincantieri, e.g. the reorganisation process and the creation of the Societa operativa that took place in 1984. The analysis of collective bargaining pointed to the willingness of the parties to increase the company’s competitiveness, investments in research and internationalisation. To this end, a number of changes were introduced, among others variable pay, which was made dependant on productivity and business efficiency, and more collaborative relations with trade unions. Part three of this work is divided into two sections. Section one provides an examination of the supplementary collective agreement concluded by Fincantieri in 2009 and an analysis of the company’s restructuring plan that started in 2011. Section two describes the most relevant moments characterising the conclusion of the new collective agreement between the company and trade unions following the 2008 recession. Finally, the concluding part of this research focuses on negotiations leading to the conclusion of a further collective agreement in 2016, placing particular emphasis on the stance of the parties and the actors involved.

CHAPTER ONE THE RELATIONSHIP BETWEEN FINCANTIERI AND TRADE UNIONS IN STATE MAJORITY-OWNED COMPANIES

1. The Industrial Relations System in Italy’s Shipbuilding Sector in the context of Deregulation from the 1960s to the mid-1980s 1.1. State-owned Companies’ Opt-out of Confindustria and the Conclusion of the INTERSIND ASAPT Protocol of 5 July 1962 1.1.1. Act no. 1586 of 1965 and the Separation between Private Companies and State Majority-owned Companies The evolution of industrial relations in state majority-owned companies in Italy’s shipbuilding industry should be examined starting from the establishment and the development of INTERSIND, the main employer representative in this sector. Since the 1950s, the General Confederation of Italian Industry (Confindustria) has represented public companies like Fincantieri for matters concerning industrial relations and relationships with trade unions. However, the system in place at the time did not distinguish between the public and the private sector in relation to labour relations and collective bargaining. As one might expect, following the evolution of markets over the years, many have doubted the ability of a single employer association to give voice to companies so different from one another (e.g. in terms of work organization and management). This holds true if one considers that Confindustria has represented all companies operating in Italy, including those set up with the aim of promoting Italy’s economic growth. In this respect, 22 December 1965 is considered as an important date for the evolution of industrial relations at Fincantieri. On that day, Act No. 1586 was enacted, through which the “Ministry of State Shareholdings”

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was established to monitor the operations of state majority-owned companies. In addition, the new piece of legislation determined that stateowned businesses were no longer compelled to choose Confindustria as their representative body in negotiations. This move made it possible for the first time to speak of “effective and actual pluralism” in relation to employer representation. As far as trade union aspects were concerned, state-owned businesses – which for the most part were controlled by two major holding companies (IRI and ENI) – were represented by INTERSIND (chiefly those run by IRI) and Associazione Sindacale Aziende Petrolchimiche (mainly those managed by ENI). As for the Italian shipbuilding sector, INTERSIND has replaced Confindustria since 1965 in relation to its representative function, providing support to employers for a number of issues. This might be linked to the common assumption – which was widespread in the national economic and social context – that the interests pursued by employers in the private sector and those of state-owned companies collided when it came to competitiveness in target markets. The efforts of drawing a clear line between the management of industrial relations in the public and the private sector initially remained on the drawing board, a sort of work-in-progress project. The period immediately following the enforcement of the 1956 provision was marked by negotiations during which the bodies representing private and state majority-owned companies (particularly those run by IRI) worked together. Therefore, collective bargaining took place in a spirit of cordial relations and cooperation between all actors involved, favouring the conclusion of agreements that benefitted all workers. 1.1.2. Centralised Bargaining leading the Industrial Relations Scene in the 1950s The conclusion of agreements applicable to all workers in a given industry was the result of the way in which collective bargaining had developed at the time. In the years following corporatism, interconfederal agreements played a major role in collective bargaining. Anti-union sentiments, which could be found particularly among Italy’s private employers, significantly limited the ability of trade unions to effectively pursue workers’ collective interests in the workplace. This sentiment compelled actors to enter into interconfederal agreements containing terms that governed workers’ rights and duties, concurrently minimising (or ruling out) the possibility of resorting to decentralized bargaining to lay down arrangements which were more specific to a given working context.

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Consequently, the actors involved in industrial relations at Fincantieri were management and bodies consisting of individuals appointed through official elections to pursue the interests of workers in a particular company (so-called internal commissions). However, internal commissions played a marginal role in terms of employee representation, for they usually performed consultation functions or were asked to monitor that management complied with the terms agreed upon in negotiations, therefore depriving them of any bargaining power. The assumption that internal commissions could not enter into any form of negotiation with the company was a direct consequence of the fact that they were not endorsed by employers or by trade unions. With employers failing to acknowledge decentralized bargaining, no agreement was concluded with internal commissions, save for those intended to extend national provisions to the company level. This also happened in the shipbuilding industry, for internal commissions only had an advisory function, without the opportunity to contribute to taking important decisions in the workplace. As for employee representation, trade unions were the only bodies that were recognized as bargaining agents, de facto preventing internal commissions from entering into negotiations. This closed system – i.e. exclusively based on interconfederal and collective agreements concluded at the national level – was also the result of unions’ lack of organisation and facilities at companies. Trade unions could only negotiate general terms and conditions at the national level – and to a lesser extent, at the local level – so they were unable to participate in company-level bargaining. Accordingly, no negotiations took place in the shipbuilding industry over this period. 1.1.3. The Quest for New Forms of Collective Bargaining: Trade Unions’ Proactive Approach and INTERSIND’s Inertia The effectiveness of the centralised collective bargaining system in place at the time became the subject of a lively debate as early as the late 1950s. This system was in line with employers’ views that the best approach to carry out negotiations was to regularly renew national collective agreements, and to deal with specific provisions improving workers’ conditions through company-level collective bargaining. Nevertheless, trade unions urged employers to amend this model, drawing on the idea that a new system was necessary aimed at significantly strengthening decentralized bargaining. Among other things, the new battle waged by trade unions over contractual conditions was the result of an evolutionary process that led

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those involved to set aside their divergent views and encourage the introduction of so-called “articulated bargaining”. At first, it was the Italian Confederation of Workers’ Trade Unions (Confederazione Italiana Sindacati Lavoratori - CISL) to display a willingness to promote a new industrial relations model where companylevel collective bargaining had a primary role. This approach, motivated by economic reasons, was at odds with that of the Italian General Confederation of Labour (Confederazione Generale Italiana del Lavoro CGIL), according to which collective bargaining carried out at the national level (particularly in relation to pay) was of benefit to all the parties concerned. In this regard, and after many years of discussions on this aspect, both the Italian Labour Union (Unione Italiana del Lavoro - UIL) – which at first had decided to sit on the fence – and the Italian General Confederation of Labour (La Confederazione Generale Italiana del Lavoro - CGIL) started to give thought to the possibility of a new bargaining model based on agreements concluded at the decentralized level. The common denominator among all these trade unions – which was also welcomed by CISL – was that company-level collective bargaining should supplement, but not replace, negotiations carried out at the national level. As already pointed out, the evolution of industrial relations and collective bargaining in the shipbuilding industry was closely related to the creation of INTERSIND, which served as a representative body for state majority-owned companies. Accordingly, the newly-created INTERSIND defined the industrial relations strategies that were implemented by the companies of IRI, among which was Fincantieri’s holding company. It should, however, be highlighted at the onset that INTERSIND’s leeway was rather limited. In its first years, INTERSIND did not have any branch operating locally. Rather, it consisted of one main delegation, with some minor groups of union representatives working at a regional and an interregional level. On this point, one might note that prior to 1960, that is the year INTERSIND formally came to being, this body did not feature the distinctive traits which were specific to an employers association. Initially, it had a few offices at IRI, and workers were in charge of dealing with industrial relations and collective bargaining. Consequently, rather than a representative body in the narrowest sense, INTERSIND could be seen more as an IRI branch office, which was tasked with pursuing the interests of its companies in relation to industrial relations aspects. In the first years, INTERSIND had an advisory role for IRI companies on union-related issues. However, as already stressed, things

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started to change significantly from 1960, that is when INTERSIND was formally set up. It was the willingness to draw a neat distinction – both economically and in terms of relations with unions – between private companies and those in which the State held a majority share that paved the way for INTERSIND’s formal establishment and recognition. Accordingly, state-owned companies were given a new organizational structure, whereby economic and financial strategies were set down by IRI, while INTERSIND was entrusted with tasks of support and representation in relations with unions, though the latter could only operate in line with the strategies put forward by the former. As for collective bargaining, Fincantieri initially adhered to INTERSIND’s contractual policy, aligning itself with the national trend that prioritized a centralised collective bargaining system and the conclusion of interconfederal and national collective agreements. This approach also had implications on companies which were part of IRI. By way of example, the need to stick to strategies laid down by the employers association in the shipbuilding industry brought about significant limitations in the industrial relations arena, considerably minimizing relations between the company and trade unions. The above seems to depict INTERSIND as a Confindustria branch office tasked with seeing to issues concerning State majority-owned companies. This state of play was also encouraged by the willingness of trade unions to prevent the creation of a gap between the safeguards granted to workers in the private sector and those operating in State majority-owned companies. As will be seen, this approach was mainly a direct consequence of the little autonomy of this organization, which did not have the power to conclude separate agreements with trade unions. 1.1.4. From “Centralized” to “Articulated” Collective Bargaining: The Conclusion of the INTERSIND ASAP Protocol of 5 July 1962 In the first few years of the 1960s, and following the establishment of INTERSIND as an employer representative body, the evolutionary process of industrial relations at Fincantieri gained significant momentum, chiefly in relation to collective bargaining. In this respect, the first steps towards enhancing bargaining autonomy came in 1962, although the industrial relations climate in which collective bargaining took place was anything but peaceful. As already pointed out, with economic conditions slightly improving – particularly when compared to the dark days following World War II –

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trade unions claimed more room to manoeuvre. They showed an interest in industry and in the opportunity to put in place a new model of collective bargaining on the employer’s premises. This sentiment became widespread in the shipbuilding industry, where unions were increasingly concerned with industrial policies implemented at the company level. Thus, union representatives wanted to set up a system that, while acknowledging the primacy of collective bargaining, introduced decentralized bargaining. Obviously, this intention ran counter to that of Confindustria members, who argued for a centralized collective bargaining system, to be implemented through interconfederal and collective agreements concluded at the national level. Their stance was the result of hostility towards trade unions, which characterized most Italian employers in the private sector. The latter thought that there was no point in entering into negotiations with trade unions locally, therefore resisting an industrial relations system featuring different bargaining levels. The first significant change to Italy’s bargaining structure took place in 1962 following the renewal of the national collective agreement in the metalworking sector. Over the same year, negotiations were characterized by heated confrontation between the parties, particularly because trade unions wanted to include the introduction of a new contractual system into the bargaining agenda. As seen, the proposal that Italy’s industrial relations system should include so-called “articulated bargaining” was met with resistance by Confindustria, while INTERSIND appeared more willing to consider this possibility. In all likelihood, INTERSIND’s reaction stemmed from its will to make the distinction between the two representative bodies even clearer, therefore promoting continuous dialogue with trade unions rather than engaging in an all-out battle. Accordingly, trade unions and INTERSIND concluded a fully-fledged protocol on 5 July 1962 laying down new guidelines on collective bargaining in state-owned companies. Rather than the separation between the two bodies that took place a few years before, it was this document that marked INTERSIND’s move away from Confindustria. This holds true in consideration of the fact that privatesector employers held onto their view that collective bargaining should take place at a national level and see to more general aspects. According to the new protocol, collective bargaining consisted of three main levels: national (industry-level) collective bargaining (e.g. in the metalworking sector); sectoral bargaining (which concerned the following six sectors: steelmaking, shipbuilding, electro-mechanical engineering, steel production (secondary fusion), avio-moto-auto (i.e. the production of

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aircrafts, motorcycles and automobiles), and mechanical engineering in a broad sense); and company-level bargaining. These three bargaining levels were organized according to hierarchy, and referral clauses (clausole di rinvio in Italian) laid down in national collective agreements specified those aspects that could be negotiated at each level. So, for example, sectoral bargaining was concerned with work organisation (e.g. working time and changes to the employee grading system) and remuneration (e.g. minimum wages, benefits for more vulnerable workers). As for company-level collective bargaining, negotiations involved bonus schemes (e.g. production bonuses or new piecework schemes) and aspects related to working tasks (e.g. the introduction of performance evaluation). Accordingly, the protocol concluded on 5 July 1962 set forth a comprehensive range of provisions to regulate collective bargaining. However, while assigning a major role to decentralized bargaining, the new piece of legislation still regarded it as a method to supplement national collective agreements, in line with CGIL’s views. Indeed, the protocol seemed to meet the pressing requests made by trade unions, in relation to acknowledging the legitimacy of contractual clauses determined in company-level collective bargaining. It was, however, necessary to point out that it was generally the local branches of trade unions that engaged in negotiations with state majority-owned companies, due to the lack of a well-established trade union presence on the employer’s premises. Besides representing a major step towards bargaining autonomy, the protocol gave state majority-owned companies further advantages in relation to industrial peace. In exchange for the conclusion of the protocol referred to above, trade unions undertook not to engage in actions intended to amend terms agreed upon through the new bargaining model. As already discussed, the conditions laid down in the protocol were also mandatory for companies in the shipbuilding sector, among which was Fincantieri. Therefore, it can be argued that all IRI companies contributed to innovating their own representative body, supporting the diffusion of company-level bargaining. The relevance of the 1962 protocol can be better understood when looking at the increasing significance of INTERSIND in the national industrial relations scene. Importantly, employer representation in stateowned companies was initially given a marginal role in the development of national industrial relations. However, after limiting Confidustria’s room to manoeuvre and clinching the 1962 agreement with trade unions – employer representative bodies managed to carve out an increasingly

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relevant role for themselves, becoming the main driving force in the evolution of industrial relations. The attempt to engage in dialogue and to share ideas with trade unions had the result of making INTERSIND the privileged interlocutor for negotiating and entering into agreements that would benefit both workers and employers. The protocol can also be seen as the harbinger of the separation that took place a few months later following the conclusion of a separate collective agreement involving state-owned companies in the metalworking sector.

1.2. From “Articulated Bargaining” to “Non-binding Bargaining”: Italy’s Hot Autumn 1.2.1. First Attempts to Promote “Dialogue” and “Participation” between Employers and Trade Unions: The 1967 Restructuring Plan in the Shipbuilding Sector The effects of the 1962 Protocol also manifested in the following years, leading Fincantieri companies and state-owned ones to seek cooperation and collaboration on a continuous basis. The renewal of metalworkers’ collective agreement in 1966 is a glaring example of this approach. INTERSIND – on advice from the Ministry for State Shareholdings – pledged to seek agreement with trade unions on new aspects that could help bring together the needs of employers and those of the social partners. In this respect, it was significant that a Circular issued by the Minister on 16 December 1965 invited public offices to “extend union rights to public-sector companies” to foster “collaboration that goes beyond mere formalities”. The sharing of views and ideas was one of the most relevant effects of the collective agreement concluded in the shipbuilding sector, the financial and productive situation of which was particularly troublesome at the time. The sector’s negative trend was due to the serious economic crisis affecting Europe, which had to deal with Far East countries’ increasing competitive levels in relevant markets. The struggle faced by employers called for immediate steps to keep the sector’s production and economy afloat. Accordingly, a restructuring plan for the shipbuilding industry was agreed upon on 29 November 1967. Apart from entailing a number of obligations for the companies operating in this sector, this measure was a significant one in that it was the first time that a restructuring plan received trade unions’ full approval.

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1.2.2. Representation Crisis and Social Struggles: The Rise of the “Non-binding bargaining” System The development targets laid down in the 1962 protocol – which had already been discussed by INTERSIND and trade unions as early as 1956 during talks to renew the national collective agreement – went unmet and were set aside by the end of the 1960s. During the renewal just referred to above, some major difficulties arose at the time of setting down referral clauses, putting a strain on the climate of participation and collaboration that had just been established. The 1962 restructuring plan failed to take off for several reasons, among which were trade unions’ lack of a modern approach to collective bargaining and employers’ difficulties in terms of industrial planning, particularly among state majority-owned companies. Eventually, the development plan laid down in the Protocol came to nothing in a slow but inexorable fashion. Compounding the picture was the increasing difficulty to decrease the gap between the bodies representing state-owned companies and Confindustria, due to the attempt of the latter to carve out a major role for itself and to modernize industrial relations. From that moment, INTERSIND could no longer rely on Confindustria support to envisage new rules on industrial relations and collective bargaining. This state of affairs came to a head in 1969, as talks to renew metalworkers’ collective agreements took place in a particularly charged atmosphere. This period was called the “Hot Autumn” and featured significant social unrest, a tool used to emphasize the need for employment protection. Social agitation also resulted in the passing of Act no. 300 of the Workers’ Statute in 1970 and in other major changes that upset the fragile balances of Italy’s industrial relations system. Riding the wave of discontent – which by now had spread all over the country in a number of sectors fuelled by industrial unrest and student protest – trade unions demanded more and more employment protections for workers. In the shipbuilding sector, trade union protests concerned remuneration, particularly for piecework. Besides that, negotiations at company level focused on alternative and more general aspects than those permitted by referral clauses laid down in collective bargaining. This was the backdrop against which metalworkers’ collective agreement was negotiated, and trade unions made far more demands than those they were entitled to pursuant to the 1962 Protocol. Evidently, union claims were met with disapproval by state majority-owned companies, leading to disagreement regarding the issues delegated to decentralized bargaining. As a direct consequence of this state of play, the system based on

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derogation clauses no longer applied, although providing a major contribution to concluding the 1962 Protocol. At the time of its implementation, the derogation system referred to above clearly identified the terms associated with each bargaining level (national, sectoral, and company level). Another consequence of this situation was the end of the industrial peace trade unions undertook to maintain in exchange for the development of company-level bargaining. From then on, trade unions felt empowered to take action to prompt changes or to conclude agreements at any bargaining level. In addition, as collective bargaining was no longer based on delegation clauses, no links existed among bargaining levels, with this lack of coordination that translated into more uncertainty. Therefore, a shift took place from “articulated bargaining” to “nonbinding bargaining”, whereby bargaining agents at company-level were given free rein concerning terms and conditions which were up for discussion, favouring the development of decentralized bargaining. The latter was also empowered to amend the terms laid down in national collective agreements, seeing that it had unlimited operational powers and no limits were imposed about its remit. With both the 1962 Protocol and the system granting state majorityowned companies (e.g. Fincantieri) and INTERSIND a leading role in industrial relations no longer in place, the latter lost momentum at the national level, indirectly benefitting Confindustria. Consequently, the first years of the 1970s witnessed the successful attempt from private-sector employers to smooth over relations with trade unions, especially because of the spirit of renewed collaboration characterising relations in companies represented by Confindustria. Accordingly, in the period immediately following 1968 social protests, the equilibrium characterizing employer representation was once again called into question. Confindustria took the lead and, while championing decentralized bargaining, attempted to restore friendly relations with INTERSIND. These reconciliation efforts were aimed at promoting cooperation to benefit both the parties.

1.3. The 1970s: Economic Crisis and the Revival of Centralised Collective Bargaining As seen, state majority-owned companies suffered an identity crisis at the start of the 1970s. Unlike in the past, INTERSIND was nowhere near being able to serve as a representation body and provide national

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guidelines about collective bargaining and industrial relations. Fincantieri, and other state majority-owned companies more generally, concluded that it was no longer possible to implement new lines of industrial policy, nor guidelines as regards relations with trade unions, without considering the position of private-sector companies on this matter. The foregoing aspects led INTERSIND and Confindustria to reconcile, a process that was seen as necessary as it was meaningful. Benefitting from the hurdles faced by the former, the latter regained a leading role in the industrial relations arena, and speculation mounted that INTERSIND could re-join Confindustria, a possibility which was not seen favourably by representatives of the IRI Group. Rather, a need arose in the shipbuilding sector, and more generally in state majority-owned companies, to share practical guidelines on industrial policy – particularly in terms of innovation – to boost business competitiveness in the markets concerned. As increasing and intense competition characterised this sector, taking steps to increase productivity and efficiency and to fill the existing gap between Fincantieri and major international competitors became a matter of urgency. The changes just described should be also considered against the difficult economic background of the latter half of the 1970s. The effects of the oil shock – coupled with a particularly tense social context resulting from past conflicts – gave rise to a situation of profound uncertainty. It was the oil crisis that best illustrated Italy’s economic distress, which also produced insurmountable difficulties in some of the largest national groups (e.g. Montedison) while pointing to the absence of government policies intended to introduce new technologies (e.g. above all on energy diversification). Accordingly, social uncertainty and the serious economic downturn resulted in an increased “malaise index”. Further, and as is frequently the case in Italy, the scenario described above led many to postulate that solutions should come from central institutions. Therefore, besides worsening the situation faced by Italian companies, the economic and social crisis taking place in the second half of the 1970s re-established the centralization of collective bargaining. By way of example, the measures devised to deal with the crisis (e.g. restructuring plans) were agreed upon by means of general agreements concluded at the national level. The first consequence of this approach was that interconfederal agreements were given new momentum. They were regarded as the main tools to prevent the collapse of national industry, both because of the actors involved and the wider scope of the measures adopted. The fact that

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the government actively engaged in negotiations was also seen as a relevant factor. Besides acting as a mediator, the government had also a say in the conclusion of interconfederal agreements, for instance by contributing economically and politically. Accordingly, this approach attempted to avoid that companies solved their problems on their own, giving rise to a particular collective bargaining system which was impossible to apply consistently. In some respects, collective bargaining at a company level was put on hold and, starting from 1977, those employers negotiating with trade unions operating at the local level were excluded from a number of tax benefits. The development of a new industrial relations system then faced a slowdown, and the time-honoured IR model based on collective agreements concluded at the national level was resumed and seen as the only possible alternative. Naturally, the decision to rely on interconfederal agreements also had positive effects, a nice example of which was the agreement concluded on 25 January 1975 regarding the so-called unificazione del punto di contingenza. In practice, the amount of remuneration that depended on cost-of-living increases was now the same for all workers. Standardising the punto di contingenza was necessary because of the rapid increase in the cost of living, which in turn was due to higher inflation and remuneration levels. For this reason, the highest possible punto di convergenza (i.e. the highest remuneration level for this item) applied to all workers, thus without making it dependent upon workers’ age or years of service. Another interesting aspect concerning the status of industrial relations was the attempt to involve trade unions and to task them with monitoring restructuring plans and crisis management processes.

2. Developing a Regulated and Participatory Model of Industrial Relations: The 1984 IRI Protocol 2.1. The Slow Restoration of Dialogue in Industrial Relations: The Economic Crisis and the Tripartite Agreements Concluded at the start of the 1980s 2.1.1. New Approaches to Business Management in State MajorityOwned Companies The government continued to play a leading role in the conclusion of agreements at the national level also in the first years of the 1980s. It was a time characterized by a serious economic recession, although tenuous signs of recovery were beginning to be reported. Nevertheless, the

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economic measures put in place between the end of the 1970s and the start of the 1980s failed to tackle the grave crisis affecting national industry. A continuously rising inflation and the absence of deflationary policies produced an increase in labour costs which employers found difficult to deal with. The situation at Fincantieri was not much better, as the need emerged to find solutions to boost productivity. More generally, the first years of the 1980s were marked by a change in top management in the IRI Group, which also brought about a change of course in industrial policy and development. In this respect, the newly-elected President of IRI, Romano Prodi, argued for the need of state majority-owned companies to support and promote their role in markets dominated by private-sector employers. Prodi himself warned that it could be risky for them to hide behind the fact that they were state-run companies, prompting members to set in motion initiatives aimed at favouring the “capitalistic market they are currently operating in”. Prodi also thought that devising economic measures aimed at identifying standards to increase competition and quality and a new industrial relations system involving the main actors of industry had become a matter of urgency. Implementing the new measures referred to above was vital especially in consideration of the fact that most production capacity of state majorityowned companies, among which was Fincantieri, was used to fulfil commissions from the State, which therefore served two overlapping roles (the majority shareholder and the main client). One egregious example of this could be found in the shipbuilding industry. At the time, Fincantieri was seriously affected by the recession that hit the shipbuilding industry, to the point that management started to think that prompt action was needed to prevent business closure. As will be seen, this state of play was the harbinger of a major change in the national shipbuilding sector, which would set the scene for the creation of the Fincantieri operating company. 2.1.2. The New Re-centralisation of Collective Bargaining and the Conclusion of Tripartite Agreements As previously seen, attempts aimed at lifting national industry out of recession included collective agreements concluded at the national level. Significantly, the first years of the 1980s witnessed the highest degree of centralization of collective bargaining, as priority was given to the conclusion of tripartite agreements involving employers, trade unions and the government. The new structure of these accords was best illustrated by the so-called “Protocollo Scotti”. This agreement, which was named after

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the then Ministry of Labour and Social Security, was concluded on 22 January 1983 by government representatives, several trade unions (CGILCISL-UIL), and employers’ associations. The Protocollo Scotti was signed after months of lengthy negotiations and became the very first example of “concertation”, i.e. an agreement where the government played a fundamental role. This Protocol was the result of effective mediation between public power, entrepreneurs and the social partners and set out to regulate collective bargaining and economic aspects as well, for instance by introducing measures to bring labour costs into line with expected average inflation rates. Still on the economic factors, the principle and the terms of the agreement attempted to limit costs and to promote employment, also by means of new flexible forms of working which could enhance competitiveness of national industry. To this end, the involvement of the government in negotiations was important, as measures were envisaged to reduce the social security contributions paid by employers. As for job-creation initiatives, the aim was that of deregulating the labour market to facilitate access to employment, while a major overhaul was needed in collective bargaining to provide a more coherent legal framework. This is because collective bargaining was highly affected by the many changes made to the guidelines devised to conclude collective agreements. Consequently, while at first the aim had been that of promoting decentralized bargaining, a common conviction prevailed afterwards that the answer to the problem should have been sought in interconfederal agreements which applied to all workers. This state of uncertainty prevented the renewal of many collective agreements between the end of the 1970s and the beginning of the 1980s, above all because of the failure to clearly identify the contractual terms to be discussed on each bargaining level. Therefore, the above pointed to the need to look for innovative measures to supply collective bargaining with a well-defined and shared legal framework. The Protocollo Scotti was a move in that direction, as the parties aimed to promote a new model of industrial relations. The key principle on which the Protocol was based and that was a major source of innovation was so-called ne bis ne idem (“not twice on the same issue” in English). This principle was intended to prevent the overlap of different bargaining levels when dealing with the same contractual issue. This provision was particularly necessary following, on the one hand, the widespread use of “non-binding” collective bargaining since the 1970s and, on the other hand, the little space provided to “articulated” collective bargaining set down in the 1962 Protocol concluded by INTERSIND and trade unions. Because of the foregoing,

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new limitations were placed on the contractual terms that could be negotiated at company and national levels. This aspect is clearly outlined in the Protocollo Scotti, in which it was stressed that decentralized bargaining should, by all means, be regarded as an alternative to collective bargaining carried out at the national level, by also referring to a specificity criterion in relation to the topics to be discussed at the company level. Another feature of the Protocollo Scotti was the introduction of a cooling-off process. In other words, it was agreed that industrial disputes would be settled on the employer’s premises, to promote harmonious participation and collaboration between employers and trade unions and to find solutions satisfying both parties’ needs. In a way, the Protocollo Scotti was at the same time the most egregious example of “tripartite” collective bargaining – where the government was assigned a pivotal role – and the last successful attempt at implementing this bargaining model. The parties involved in the conclusion of the 1983 Protocollo would convene again to ensure continuity to the economic arrangements previously laid down. In this respect, the government deemed it necessary to review the criteria making up the scala mobile (“wage-indexation system” in English) to promote a gradual and effective reduction of inflation rates. This move was hailed by CISL and UIL, which welcomed a reduction in the cost of living, but was staunchly opposed by CGIL, which at the time was led by Luciano Lama. As a result, major rifts emerged among these different sections of trade unions which also had implications at the company level. For example, workers at Fincantieri were instigated by the FIOM CGIL and called a strike to protest this provision. Workers’ demonstrations were particularly intense at the Monfalcone plant, which was home to Fincantieri’s largest shipyard in Italy. The aspects examined above made it impossible to keep on implementing tripartite collective bargaining, and the government imposed amendments to the scala mobile by means of Decree of 14 February 1984, also known as the San Valentine Decree. Besides becoming the subject of intense controversy at political and social levels, these changes also marked the demise of concertation in collective bargaining.

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2.2. A New, Regulated Industrial Relations Model based on Dialogue and Cooperation: The IRI Protocol concluded on 18 December 1984 2.2.1. Promoting and Opposing Dialogue: The New Rift among Employers’ Organisations over Industrial Relations Governance In the years considered, employers in Italy were still dealing with serious economic issues. Like many other national companies, Fincantieri struggled to keep up with competitors based in Japan and the United States. The financial uncertainty marking the end of the 1970s and the beginning of the 1980s prevented employers from focusing on innovative measures to challenge and prevail over competitors in relevant markets. Benefitting from the standstill situation referred to above, large industrialised countries successfully and strategically reviewed the way they managed the employment relationship. Accordingly, while new initiatives promoting greater operational flexibility were implemented in Japan and in the United States, Italy was still affected by an overly stringent regulatory framework preventing employers from increasing their levels of efficiency and productivity. This issue was a serious one, especially among state majority-owned companies. Fincantieri, and employers in the IRI Group more generally, reported particularly negative trends, upsetting the Group’s financial stability. As for the shipbuilding industry, it has already been stressed that the economic downturn brought about a decline in competitiveness, to the point that many hailed the idea to develop a rescue plan based on “rationalization and restructuring”. Consequently, failing the attempt to conclude tripartite agreements, the quest for solutions to overcome the economic struggle became a matter of widespread concern in Italy. For example, among private-sector employers, the abortive efforts to promote dialogue through tripartite agreements led many to conclude that the involvement of trade unions was superfluous and that negotiating with workers was the best way forward. Once again, employers in the private sector held onto the idea that the approach based on cooperation with unions was all but an opportunity, for it was for the company to put in place necessary measures to progress and enhance competitiveness. On the contrary, the state of uncertainty reported over the last years helped state majority-owned companies to regain their high ground in the industrial relations arena. An example of this was INTERSIND which – after having kowtowed to policies put forward by Confindustria and given up on the idea to become an autonomous body promoting new forms of

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industrial relations – gathered new momentum and resumed relations with trade unions, through the same participatory approach used at the time of its establishment. The differences existing between employers represented by Confindustria and those referring to INTERSIND about industrial relations were evident in the planning of restructuring, that would have a stronger emphasis on organizational flexibility. On the one hand, employers in the private sector gave priority to schemes that were laid down by the company’s governing bodies, without giving the social partners the opportunity to share them. On the other hand, state majority-owned companies, among which was Fincantieri, moved again in the opposite direction, as they thought that full agreement on the decisions taken would have benefitted the parties involved. 2.2.2. The 1984 IRI Protocol: Objectives and Positions of the Parties As we have seen, the approach based on openness and participation accelerated the conclusion of an agreement laying down new guidelines to practice industrial relations. On 18 December 1984, IRI, INTERSIND, and CGIL, CISL and UIL ratified a protocol setting down key principles – based on a participatory and shared approach – to be applied at the time of concluding new employment relationships in State majority-owned companies. This agreement was also the result of the willingness to innovate conveyed by the latter, among which was Fincantieri. The assumptions underlying this agreement concerned the urge to revitalize those industries in which companies belonging to the IRI group operated. The aim was to regain competitiveness, efficiency, and productivity and to strengthen the position of State majority-owned companies in international markets by means of restructuring, industrial reorganisation and mergers. Furthermore, the 1984 IRI protocol would be a key element in the restructuring scheme put in place for the shipbuilding industry. According to the underlying principles described above, workers had a lead role in fulfilling the foregoing objectives, as had proper allocation and rationalization of resources and amicable relations between employers and the social partners. Therefore, the 1984 agreement originated from both State majority-owned employers and trade unions’ desire to renew relations to enhance innovation in the industrial relations system, although the latter manifested different stances at the time of negotiating the protocol. For instance, CISL saw the new direction taken by the IRI Group – to which the newly-elected president Romano Prodi greatly contributed – as an opportunity to build up new and effective forms of participation.

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The same could be said of UIL which, although initially lukewarm about the conclusion of the agreement, ended up aligning itself with the position of CISL, thus suggesting that the latter had the most influential role among the three trade unions. Finally, CGIL initially put forward a “business plan” (piano d’impresa) to pursue industrial democracy based on the shared planning of economic strategies and procedures. Subsequently, it opted to join CISL and UIL by entering into the agreement on the IRI Group and promoting a new industrial relations model. 2.2.3. The 1984 IRI Protocol: The Setting-up of Advisory Committees and the Management of Industrial Conflict As discussed, the 1984 Protocol gave fresh momentum to a cooperationbased approach to be implemented in State majority-owned companies (including Fincantieri) to define the role of union representatives within the company. In this regard, new joint bodies were set up, called advisory committees, consisting of representatives from companies and trade unions who were assigned new roles as regards information-sharing. The aim was to share and evaluate the different measures concerning industrial policy to come up with the most appropriate solutions for those involved. An important aspect characterizing the 1984 agreement was conflict management based on a relational model helping to prevent industrial action by trade unions. Conflict management was not to be intended as the employers’ attempt to preclude trade unions from calling strikes, but as a mechanism to systemize ways to share information so that industrial action had only to be taken as a measure of last resort. Consequently, the aim was not that of limiting union activity, as the strike was still a fundamental element in trade unions’ traditional approach to industrial relations. Based on this assumption, efforts were made to reduce strike action as far as possible, significantly benefitting business productivity. In other words, those concerned attempted to contain, if not to eliminate, industrial conflict taking place at the company level. The 1984 Protocol thus pursued a two-fold objective: fulfilling the need of informationsharing voiced by a number of trade unions and preventing industrial action as much as possible as demanded by employers, to increase productivity and efficiency. Therefore, IRI and INTERSIND seemed to give new momentum to principles like industrial peace while acknowledging trade unions as relevant consultation actors. For this reason, management practices in place between the 1960s and the 1970s to deal with major social protests were reintroduced, yet increasing the opportunities to meet and share views to avoid that industrial action

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prevailed over negotiation. As one can easily understand, transparency concerning the employer’s decisions was the best way to manage industrial conflict in a rational and coherent way. 2.2.4. The 1984 IRI Protocol: The New Information and Consultation System In reference to the information system, the IRI protocol expressly provided that the social partners should be heard at the time of “planning, implementing, and assessing industrial, economic, and employment policies”. It is important to point out that, unlike Germany’s codetermination, the agreement concluded in Italy established that information should be literally passed on from the employer to trade unions with the support of joint bodies, in order to enable unions to take a position in relation to the company’s decisions. It might also be apt to clarify at which point information was shared. Unlike in the past, the employer was now compelled to make unions aware of which possible industrial policies were under evaluation before putting them in place. Consequently, in the 1970s the employer would inform trade unions of the strategies devised a posteriori, giving the social partners a marginal role. Now, those involved shared company strategies before making a final decision, thus workers’ representatives carried out key functions to identify the best options to pursue the objectives set. As already stressed, the new information and consultation system gave a lead role to advisory committees. Being members of organizations characterized by a pyramidal hierarchy, these bodies would operate at group, local, and industry levels. This way, participation was therefore ensured, as was detailed information sharing. Advisory committees themselves were aware that they only performed consultative functions, for their opinion did not have a binding character. This was certainly the direct consequence of the will of the parties not to turn the industrial relations systems in place at the time on its head. Significantly, collective bargaining still maintained a leading role in the definition of guidelines to manage employment relationships and industrial relations, more generally. Therefore, the 1984 IRI Protocol significantly belittled the functions of advisory committees. They never played an active role as regards collective bargaining and, importantly, their advice was not as influential as to affect trade union negotiations, for example on matters related to employment relationship regulation. Among other things, the IRI Protocol had also been vital for Fincantieri and other companies in the IRI Group to pull themselves out of

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recession. The conclusion of the agreement meant that trade unions consented to changes to production processes facilitating business repositioning. Furthermore, by means of this agreement, trade unions also agreed to discuss with employers represented by INTERSIND the possible introduction of new forms of flexibility, such as novel working time arrangements and new forms of intercompany mobility. On their part, trade unions showed a willingness to sign the agreement to ensure workers’ stability of employment and prevent dismissals due to the longlasting economic recession. The promotion of employment policies added to other measures – e.g. restructuring plans – which were a distinctive trait of the agreement. While based on full cooperation between the IRI Group and trade unions, the 1984 Protocol was frequently a source of controversy between those involved. For example, the shipbuilding and the steelmaking sectors, which involved many companies in the IRI Group, suffered the most severe consequences of the international economic crisis. In both cases, the IRI attempted to deal with this situation through cost reduction initiatives and a restructuring plan to help the repositioning of the companies involved. In the opposite camp, trade unions, while acknowledging the need to take steps to face the serious crisis affecting employers in those sectors, regarded dismissals as a more effective solution to increase competitiveness. This move would help the Group’s fiscal consolidation and would reduce the social consequences of these measures, both in terms of employment and remuneration.

2.3. The IRI Protocol and the Federmeccanica Document: Different Proposals, Same Goals In parallel with the 1984 Protocol concluded between IRI, INTERSIND and trade unions, a manifesto concerning the management of industrial relations was also issued by Confindustria, the aim of which was to set down measures to give new momentum to industrial relations in the private sector. This “programmatic document” was drafted against the backdrop of the paralysis affecting private-sector employers as regards industrial relations, particularly in collective bargaining and relations with the social partners. The impetus that restored Confindustria’s leading role as employer representative between the 1970s and the 1980s dwindled, because of the increasing autonomy of employers represented by INTERSIND, among which was Fincantieri. This state of affairs would bring about frosty relations between the two representative bodies. At any rate, employers in the private sector and State majority-owned companies

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voiced the need to introduce clear-cut policies on the way employers should handle relations with workers and trade unions. In reference to what has been said so far, and concurrently with what was done for State majority-owned companies, Federmeccanica (i.e. Italy’s engineering industry federation) issued guidelines to be used in industrial relations in the private sector. The fact that this document was issued at the same time as the one drafted by IRI was not coincidental, but expressed the will to draw a clear dividing line between the terms laid down by IRI and Confindustria. Indeed, there appeared to be marked differences between the two documents, mainly regarding their underlying principles. Specifically, the IRI Group favoured a system based on cooperation and collaboration between employers and the social partners, in particular in business premises. Confindustria took a diametrically opposite approach: employers in the private sector would implement a system that sidelined trade unions as far as business decisions were concerned. This new organizational model made a clear distinction between trade union relations (i.e. between the employer and trade union representatives) and company relations (involving the employer and the workers). This distinction was a significant one, underlining that trade unions had no say on managerial decisions in the private sector. Consequently, unions could not challenge employers’ action, for example as regards restructuring, production planning, technology investments, initiatives to promote employment and so forth. This firm stance drew on the assumption that discussing decisions with trade unions about how to restore productivity and efficiency to increase competitiveness was unnecessary, if not counterproductive. The main idea was that employers were the only ones who could understand the needs of their company, thus they had to be given free rein in relation to decision-making. Afterwards, employers would apprise workers of their decisions, listen to their opinion and deal with possible consequences. The title given to the document presented by Federmeccanica (“Businesses and Work”, Imprese e lavoro in Italian), was also relevant, for it highlighted the will of the body that represented companies in the private sector to convey the idea that employers had full powers in decision-making in industrial relations. This was also confirmed in the document itself, which was fully in line with the idea inspiring Confindustria: the employer was the one that faced risks arising from entrepreneurial activities. Therefore, relations between the business and the workers could not be mediated through collective bargaining and, more generally, by trade unions, which were frequently sources of conflict. The document also pointed out that industrial relations should

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aim at promoting aspects like competitiveness, innovation, flexibility of production, and deregulation of the labour market, so trade unions should not be allowed to interfere or oppose employers’ initiatives. Of interest was the fact that this approach particularly concerned company-level industrial relations, for a need arose, especially in the metalworking industry, to involve employers and workers without the support of external actors. Accordingly, Confindustria’s main idea was to promote direct communication between management and employees, to enable the former to make decisions (e.g. as regards performance-based pay) in line with expectations of the latter. In those years, it was as though a replay took place of what had happened in the 1960s. On the one hand, companies represented by INTERSIND promoted a more cooperative and collaborative approach with trade unions. On the other hand, Confindustria took pains to avoid close collaboration with unions, particularly as regards managerial decisions. The impression was that Confindustria wanted to highlight that workers were perfectly able to deal with consequences arising from employers’ unilateral decisions on their own. Of course, the intention was to significantly delegitimize trade unions, assigning them a general representation role. Trade unions would be entrusted to ensure compliance with labour legislation and equality of treatment for all workers. Therefore, it is safe to argue that the attempt to empower trade unions in companies came to nothing and brought no benefits. It is also interesting to reflect upon the different effects these two models produced on conflict management. In the case of State majorityowned companies, trade unions undertook to engage in industrial action only after exhausting all other possibilities. The reverse was true for companies in the private sector, where a growing conflict-ridden climate restored forms of social protests that were typical of the late 1960s. Of course, trade unions did not accept submissively this diminishing role, especially in relation to safeguarding workers’ collective and individual rights. The fact that they disagreed with what was provocatively laid down in the Federmeccanica document would set the scene for a new wave of strikes and protests. The above speaks volumes of the different ways industrial relations were managed in private-sector companies and State majority-owned companies. IRI and INTERSIND took care to develop industrial relations even further. Conversely, Confindustria appeared to take steps in the opposite direction, promoting principles like “primacy” and “denial” which put at stake the very existence of the industrial relations system.

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As the following years clearly showed, the model put forward by Federmeccanica was doomed to failure, due to the impossibility to obtain satisfactory results without the involvement of all actors traditionally engaged in negotiations and in the setting-up of business plans. On the contrary, and although with the amendments made over time, the protocol concluded by IRI and INTERSIND represented a sound base upon which other arrangements could be made to increase the competitiveness of national industry.

3. Moving from Public to Private Ownership: New Industrial Relations Models in State-owned Companies 3.1. The Unsuccessful Implementation of the 1984 Protocol and the Conclusion of the New Protocol on 16 July 1986 3.1.1. The 1984 IRI Protocol: Organisation and Implementation Issues The Protocol concluded on 18 December 1984 under the auspices of INTERSIND by the IRI Group and a number of trade unions (CGIL, CISL, UIL) introduced some innovations in Italy’s industrial relations system, most of which were initially implemented on an experimental basis. For this reason, it was agreed that the new provisions would remain in force for a transitional period of 12 months, during which the parties would meet regularly (every four months) to assess their effectiveness. This clause was the result of the shaky relations between employers in the public and private sector and the social partners at a national level and justified a system based on close participation and collaboration, the outcomes of which were unpredictable. IRI and trade unions’ wariness could also be motivated by their will to overhaul the industrial relations system, by enabling the union to issue specific opinions which – albeit not binding – could influence employers’ industrial policies. The nature of trade unions themselves added a further hurdle to the implementation of the protocol. As one can imagine, despite their good intentions as regards cooperation with employers, a number of practical difficulties were reported by advisory committees at the start of their activities, also at Fincantieri. Traditionally, trade union demands were made through industrial action (e.g. protests), so they struggled to amend their own modus operandi. Employers too faced some issues when devising management plans because they had to be shared with advisory committees before implementation. As was usually the case in State

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majority-owned companies, this problem was particularly felt in the shipbuilding industry. One might also note that attention was initially given to make advisory committees at sectoral and group levels fully operational, in accordance with what was specified by the protocol. Trade unions took advantage of this state of things, as workplace bargaining was not seen as a stage to discuss business guidelines, but only to negotiate company-level collective agreements. The fact that the system set in motion would require all actors to have specific roles compounded the picture even further. In this respect, when the first advisory committees were set up, employers’ representatives were assigned more powers than trade unions. As a result, workers’ interests were affected, for union representatives, who were members of advisory committees, could exert little influence on the preparation of company plans. They were unable to provide qualified advice on restructuring plans or economic strategies put forward by company management. For their part, employers expressed some reluctance to share their initiatives, as they thought trade unions were unable to fully grasp the meaning and the extent of the proposals to increase productivity. The challenges faced when explaining the details of the 1984 protocol – particularly by trade union confederations – caused many provisions to remain unimplemented. For instance, the lack of necessary information about cool-off periods triggered industrial action even following the conclusion of the protocol. The agreement was intended to prevent strikes, but this provision was ignored and the IRI frequently called for the involvement of union confederations to settle the dispute and end protest. Another peculiar aspect, which initially gave rise to much uncertainty concerning the application of the protocol, was the powers of advisory committees and the opportunity of trade unions to challenge the employer’s decisions in court where deemed appropriate. On this point, it is important to stress that the absence of a specific provision prohibiting trade unions from initiating legal action against the employer – say for failing to provide information – would lead one to turn to the courts in compliance with ex Article 28, as this aspect was not discussed by advisory committees. This was an important aspect because lacking legislation and the fact that advisory committees were not fully operational legitimized trade unions to refer to the courts to have their rights recognized rather than seeking settlement directly with the employer, particularly at the local level. As we will see, the 1986 protocol would be particularly noteworthy on this aspect.

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3.1.2. The Natural Expiration of the 1984 Protocol and the Conclusion of the new IRI Protocol of 16 June 1986 The shortcomings and the challenges faced while the 1984 protocol was in place on an experimental basis led the parties to sign another protocol on 16 July 1986. Based on the same principles as the former, the new protocol represented the end of the transformation process started as early as 1984. The 1986 protocol clarified all the ambiguities characterizing the previous agreement. On this point, Fincantieri and other companies within the IRI Group voiced the need to make the new provision fully operational, by introducing more certain terms. Accordingly, the parties took pains to produce a text that could give clear-cut answers to issues like links between the terms laid down in the protocol and the involvement of the courts; powers granted to advisory committees; expertise of the members of the advisory committees; review of the consultation function within the IRI Group. One peculiarity of the 1986 agreement was the possibility to turn to the courts on aspects concerning the interpretation and the implementation of the terms laid down by the protocol. On this point, the parties agreed, although not without difficulty, that in order to make the terms sufficiently clear and support the attempt to promote full cooperation between employers and trade unions, it was necessary to detail the steps to be followed in the event of litigation. Consequently, the 1986 protocol established that in the event of problems concerning the interpretation and the implementation of some of its terms, they needed to be initially examined by a special joint committee made up of three labour lawyers from the IRI and three from unions. A second phase would have taken place if the matter had not been solved, by involving an “informal arbitration body” and entrusting a special committee to solve the issue. The latter consisted of the three former presidents of Italy’s Constitutional Court. This model clarified that possible differences concerning the proper interpretation and implementation of the terms laid down by the protocol would not be dealt with by third parties but by the signatories to the agreement, thus favouring the collaborative climate on which the whole document was based. The decision to refer to an informal arbitration body to settle possible litigation resulting from interpretation problems also reasserted the principle that negotiation was the cornerstone of industrial relations at Fincantieri and, more generally, at companies within the IRI Group. The functions of advisory committees were also carefully reviewed, particularly those of consultation bodies operating at the local

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level, which were set up in areas where IRI Group presence was significant or where decisions regarding industrial or economic policies could greatly impact social and occupational trends. The amendments made to functions were necessary to give effect to the activities of committees. The latter were therefore given authority to promote active policies to boost employment, to take measures to enhance local markets and to create job opportunities. As previously seen, the 1984 protocol had given advisory committees little room to manoeuvre mainly because of some members’ lack of technical know-how, which particularly affected those appointed by trade unions. On this matter, the changes made to the Protocol of 16 July 1986 were noteworthy, as now joint committees were authorized to seek the help of experts to see to particularly complex issues. Accordingly, an increasing number of committees were given the opportunity to turn to professionals with the necessary expertise to provide effective and targeted advice on employers’ proposals. Furthermore, the joint character of these bodies also allowed for expert advice to be accepted by the majority of their members, a necessary move to prevent reaching a standstill as regards advice provided on a given matter. In this respect, it was also established that if a majority vote was reached on the opinion of a professional, the motivations of those opposing it were also to be reported. This was done for the sake of transparency and can be seen as a direct consequence of the friendly climate referred to above. The last innovation brought by the 1986 protocol was the creation of the so-called “IRI Committee” that replaced the consultation procedure previously in place. The IRI Committee was another joint body with advisory functions made up of twelve members: six were appointed by IRI and a further six from the national confederation of the trade unions involved (CGIL, CISL, and UIL). The setting up of this new committee was relevant as this body was tasked with sharing and endorsing information regarding IRI Group’s main strategies. Equally important was the agenda for meetings held by the newly-created committee, which was more detailed than in the past. These joint bodies could be very different from one another in terms of presence and activities. A nice example of this was the role they had in the shipbuilding sector, and particularly at Fincantieri, during the transitional period that would produce major changes within this sector. For this reason, the shipbuilding industry provided fertile ground for cooperation between employers’ associations and trade unions. The state of uncertainty, which was also the result of the crisis affecting international markets, was seen as a pretext for discussing restructuring plans to revive the whole sector otherwise doomed to face a decline. At first, some

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difficulty emerged – particularly on the part of trade unions – regarding compliance with the terms of the protocol. However, as months passed by, the spirit of cooperation and collaboration prevailed over the traditional conflict-based approach, setting the conditions for further arrangements that would prove decisive in the development of Italy’s shipbuilding industry.

3.2. The Industrial Relations System in State Majority-owned Companies at the start of the 1990s: Economic Crises and the interconfederal Agreement of 21 February 1990 3.2.1. IRI’s Struggle: Economic Recession and Privatization Plans In the first years of the 1990s, Fincantieri, and the IRI Group more generally, had to face a particularly severe economic crisis. The financial problems that had already arisen in the 1980s persisted and put a huge strain on companies that were majority-owned by the State. As will be seen, this state of affairs will produce a major overhaul of Italy’s industrial system, leading to the gradual dismantling of IRI and, consequently, of INTERSIND. Therefore, in the time period under examination, Italy presented a particularly unstable financial market. An ever-increasing cost of living – coupled with limited labour market flexibility – brought about serious economic problems among State majority-owned companies, including Fincantieri. While playing a major role, and representing hundreds of companies from many industries at the national level, the IRI Group was experiencing a challenging period in financial terms. Reasons for this included major shortcomings in the industrial model implemented and the little relevance of the sectors most companies represented by IRI operated in. The latter was true in consideration of the fact that the IRI Group included smalland medium-sized companies that were majority-owned by the State and, as such, had to take account of government directives at the time of setting up their development plans. Consequently, if companies in the private sector had more freedom of action and succeeded in devising restructuring plans that even involved workforce reductions, employers in the shipbuilding industry were unwilling to promote innovation in terms of work organization and productive models. The idea to put in place novelty measures to tackle the deep economic crisis did not appeal to companies at the IRI Group, perhaps on the assumption that the government would have stepped in if they had needed

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financial support. This worrying situation reared its ugly head in 1992 when the IRI Group turned into a joint-stock company and was required to make its balance sheet available to the public, which of course revealed that the company was experiencing tremendous financial strain. The lack of prospects to give the Group a new lease of life generated the feeling that something needed to be done to lift IRI’s companies out of the economic recession. Gradual privatization was the solution put forward, through which companies that were majority-owned by the State would be given full autonomy as regards their management, finances, and relations. Private ownership was therefore seen as the only way forward to enable companies to raise profit, along with innovative measures to increase competitiveness in the target market. It is worth stressing that the privatization process initiated by IRI was similar to others taking place in the rest of Europe. The international economic crisis urged a number of countries to take measures to support their failing industrial models. In this sense, privatization was an effective tool to enable companies to operate freely and to help put public finances back on track, seeing that state funding was no longer needed. Returning to Italy, it bears repeating that the difficulties referred to above also affected the shipbuilding industry. Increasing international competition called for drastic decisions in order to help the shipbuilding industry and Fincantieri leave the economic crisis behind. Putting in place the changes illustrated above was particularly challenging between the 1980s and the 1990s, especially in relation to production. On this point, one might note that most production in the time period examined concerned warships which were commissioned by the State to update the national fleet. This emphasized the paradox that the Italian government was the most important (and often the only) client of Fincantieri – which was a member of the IRI Group and therefore owned by the State itself. While ensuring some stability as regards the number of orders, this state of affairs resulted in the impossibility of Fincantieri to draw up a new economic model which – by promoting innovation and new forms of work organization – could partly fill the gap with international competitors, especially those from the Far East. 3.2.2. The Setting up of New Industrial Relations Guidelines for State Majority-Owned Companies at the start of the 1990s: The Agreement to Review Labour Costs and the Contract System of 21 February 1990 As far as industrial relations were concerned, the first years of the 1990s witnessed efforts from Fincantieri and other State majority-owned

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companies in the IRI Group to put the 1984 and the 1986 protocols into effect, which had been the starting point of most negotiations entered into in the 1980s. Those years also marked attempts at introducing further changes to industrial relations to make employers competitive again. To this end, on 21 February 1990 INTERSIND, ASAP and trade unions finalized an interconfederal agreement to put in place a new collective bargaining system targeting Fincantieri and other companies that were majority-owned by the State. More precisely, the parties sought to maximize participation and cooperation between employers and trade unions, with such collaboration that should prioritize the setting-up of innovative measures as regards cost planning and competitiveness. In this respect, the parties agreed on the need to keep inflation rates low, to step up productivity through internationalization and the search for new market segments, to promote employment and improve working and living conditions. From an industrial relations perspective, the agreement intended to set in motion a thorough review of the collective bargaining system, to ensure “certainty” and “forward planning” in employment relations. Therefore, both parties to the new agreement opined that a rethinking of current bargaining levels ought to take place as regards actors involved and their powers, by also laying down special clauses (clausole di nonriproponibilità in Italian, or “non-repeatability clauses” in English) making sure that each issue was addressed at only one bargaining level. This was done to ensure that decisions reached on a certain bargaining level on a given issue were final and not affected by talks taking place at a higher level of collective bargaining. Furthermore, the newly-signed interconfederal agreement amended the maximum duration of collective agreements concluded at the national level, which was now set at 4 years, giving the opportunity to engage in decentralized bargaining every two years during this period to put forward amendments, whereas necessary. Therefore, collective bargaining carried out at the company and local level supplemented that performed at the national level, and each negotiation level was given clear functions. To be more precise, national collective agreements regulated employment relationships and basic remuneration in general terms, whereas decentralized bargaining dealt with more specific aspects like work schedules, shift working, possible reductions of working time and so forth. Company-level collective bargaining was also tasked with putting in place new benefit systems (e.g. performance-related pay). The use of these bonus schemes was already widespread in many European countries and constituted one of the most significant novelties to

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pursue higher levels of flexibility and remuneration. Variable pay arrangements were widely used to improve performance by awarding bonuses to those workers who satisfied given levels of productivity. Importantly, Fincantieri had put in place a bonus system similar to the one laid down in the 1990 interconfederal agreement as early as the end of 1980, standing out as the precursor of the arrangements introduced later on. A first attempt to put into effect the foregoing agreement was the renewal of the national collective agreement of State majority-owned companies operating in the metalworking sector, which took place on 14 December 1990. The aim of the parties to the new collective agreement was to take measures to increase productivity, efficiency, and profit to meet ever-challenging market needs. Furthermore, the parties agreed that it was necessary to ensure more certainty as regards cost planning and to put in place an industrial relations system as the one envisaged in the 1990 interconfederal agreement. The parties also urged to devise a novel collective bargaining system where actors’ powers and authority were reviewed, while the relevance of other aspects was also reasserted (e.g. the “non-repeatability clause”, the 4-year limit for national collective agreements and the 2-year limit for collective agreements concluded at the company level). Finally, reference was made to cooling-off procedures, with the parties that pledged not to promote actions or measures intended to amend the provisions set forth at different bargaining levels.

3.3. The Evolution of the Industrial Relations System in Italy: The Protocol of 23 July 1993 and the Amalgamation of INTERSIND and Confindustria 3.3.1. European Community (EC) Limitations and New Rules on Collective Bargaining: The Protocol of 23 July 1993 As illustrated in the previous chapter, a profound economic crisis affected Fincantieri and Italy’s shipbuilding industry at the start of the 1990s. The struggle faced by the sector accelerated changes to business structures, particularly among State majority-owned companies, and the search of responses to tackle the crisis, which culminated in the conclusion of the Protocol of 31 July 1992. The new agreement – which involved three parties through the so-called “tripartite system” – pursued a two-fold objective: reviewing income policies and reducing inflation. It could be seen as a new approach to concertation, as the government’s engagement was decisive to lay down effective guidelines to pull the country out of

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recession. Further, the terms of the agreement were fully in line with those of similar arrangements that were widely used in Europe at the time. In the past, faced with the need to promote economic recovery to comply with criteria to access the EU, European countries had encouraged the conclusion of agreements between central governments and the social partners, which were immediately applied nationwide. By means of the 1992 Protocol, the signatory parties (i.e. the government and the social partners), agreed that it was imperative to reduce inflation rates. To this end, to shore up public finances, the time-honoured wage indexation system (scala mobile in Italian) was set aside and replaced with a monthly flat rate called “the special remuneration item” (elemento distintivo della retribuzione in Italian). In addition, a number of changes occurred starting from 1992, particularly in companies that were majority-owned by the State, while reorganization at Fincantieri had already initiated in the mid-1980s. Also, serious economic and financial hurdles led to the privatization of all companies represented by IRI, while the Ministry for State Shareholdings was shut down to comply with the need to optimize resources. There was overwhelming agreement that companies represented by IRI should make efforts to gain more autonomy in their target markets and stop relying on government directives and funding. The changes described so far were part of an innovation process that culminated in the signing of the Protocol of 23 July 1993, which impacted all industries, including the shipbuilding sector. The agreement was the endpoint of a transformation process started with the agreements concluded in the 1990s, and aimed at supplementing economic reform with a clear definition of contractual arrangements. Significantly, the 1994 agreement provided that the parties agreed on the measures needed in terms of income policies, although its distinctive trait was the review of the industrial relations system, therefore heavily drawing upon the 1994 accord between INTERSIND-ASAP and trade unions. To begin with, the Protocol confirmed that a “two-tier” bargaining system was to be used: national-level collective bargaining and company-level collective bargaining (or, alternatively, collective bargaining carried out at a local level). In addition, negotiations on collective agreements concluded at the national level had to concern their extension – from 3 to 4 years – save for remuneration issues, which had to be reviewed every two years. The latter certainly was a peculiar aspect and was linked to the principle that it was time for collective agreements concluded at the national level to adjust minimum remuneration levels to expected inflation rates. Conversely, company-level collective bargaining was tasked with devising measures to increase productivity and efficiency and with putting forward cost-saving

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mechanisms. Again, it was stressed that collective agreements signed at company level would deal with issues that were not covered by other bargaining levels (the “non-repeatability” clause previously referred to). Further, decentralized bargaining could also negotiate aspects related to remuneration, but only those set forth by the parties on a case-by-case basis (e.g. productivity bonuses). The way it has been described above, the 1993 protocol seemed to stick to the “ne bis ne idem” principle and gave the bargaining system a pecking order. Reinforcing this point was the fact that collective bargaining carried out at the company level (or at the local level) could only cover those subjects assigned to it by collective bargaining performed at the national level. The determination of a certain time period within which collective agreements could be renewed was still another aspect that is worth a mention. More specifically, a time limit was set by which negotiations could take place and during which industrial action was prohibited (the so-called cooling-off period). Furthermore, in the event of delays in signing the new collective agreement, workers were entitled to special compensation (indennità di vacanza contrattuale in Italian) which depended on the expected inflation rates applied to minimum remuneration levels. The provisions set down by the 1993 protocol were even more important if one considers that they provided collective bargaining with a higher degree of certainty. 3.3.2. The Amalgamation of INTERSIND and Confindustria and the Creation of a Common System of Industrial Relations Many events took place in the 1990s that bore relevance to Italy’s industry, particularly to Fincantieri and to State majority-owned companies. IRI’s massive privatization pressured many employers into reviewing many of their corporate aspects thoroughly. The shipbuilding sector experienced dramatic productive and economic growth, which brought consequences also in relation to employer representation. While Confindustria maintained and strengthened its role even further following the privatization process initiated by IRI, INTERSIND underwent a slow decline that would lead it to merge with Confindustria at the end of the 1990s. The unification process between these two employers’ associations took many years to complete. At first, INTERSIND served as a representative of its many companies, leaving to Confindustria the power to safeguard their economic interests. Only in 1998 was the amalgamation process finalized and the conclusion of a specific protocol formally marked the handover, thus Confindustria became the representative body of all IRI’s companies. Fincantieri was also significantly affected by this

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decision, as from now on the latter was represented by Confindustria on industrial relations matters. 1998 was a watershed year for Italy, as it marked the dismantling of one of Italy’s leading employers’ associations. INTERSIND had been established in 1958 to create a divide between private-sector companies and State majority-owned companies. In its forty years of operation, INTERSIND managed to carve out a distinctive role for itself, contributing to developing Italy’s industrial relations. The quest for innovation characterizing INTERSIND helped the social partners to familiarize themselves with “participation” and “collaboration” as regards relations between employers and trade unions. Without this contribution, these would have been foreign concepts in Italy’s industrial relations for a long time, if not forever. Accordingly, from 2000 on, private-sector companies and those majority-owned by the State contributed equally to the evolution of Italian industrial relations. Following a period during which no significant changes were made to the industrial relations system, in 2009 the parties – e.g. the government, employers’ associations, and some trade unions (CISL and UIL) – concluded a framework agreement to reform contractual arrangements. At first, CGIL expressed criticism towards the reform so it did not sign the agreement. Through this new agreement, the parties bid to overcome the issues existing in the 1993 Protocol, which had been already pointed out by the commission evaluating the 1997 Giugni Protocol. For instance, they vigorously campaigned for decentralized bargaining, which had already been the cornerstone of the 1993 Protocol. Upholding the use of two bargaining levels (national-level and local or company level collective bargaining) and reducing contract duration to three years were the key points of the 2009 agreement. Two further objectives were set. As far as economic terms were concerned, the aim was to adjust remuneration to the cost of living, replacing the time-honoured expected inflation rate with the Consumer Price Index (Indice dei Prezzi al Consumo or IPCA in Italian). As for contractual issues, the hierarchical principle according to which decentralized bargaining could cover only those subjects that were assigned to it by national collective agreements or by legislation was reasserted. Moreover, for the first time, decentralized bargaining was given the power to amend terms laid down by collective bargaining carried out at the national level in peius, i.e. making them less favourable. While this could be done within certain limits, it was clear that the aim of the agreement concluded in 2009 was that of giving new momentum to decentralized bargaining. Agreement reached at the company or at the

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local level were once again regarded as the most effective element to promote productivity, efficiency, and competitiveness. Analyzing the evolution of industrial relations in Italy, mention should also be made of the Interconfederal Agreement of 28 June 2001 that was signed between Confindustria and the three trade unions (CGIL, CISL, UIL). The aim was to see the reform process initiated with the 2009 Framework Agreement through to completion. As it was in the past, the two bargaining levels and decentralized bargaining were given priority, although the repeal of the “non-repeatability clause” was perhaps the truest novelty in the agreement. This would give collective bargaining entered into at the company or at the local level a major role, notwithstanding the limitation imposed by national collective agreements that were concluded in each industry. Finally, one should not be forgetful of the role played by the Consolidated Text on Representation concluded on 10 January 2014, which introduced two significant changes to collective bargaining. First, a criterion was agreed upon to evaluate trade unions’ representation power, which was a necessary condition to take part in negotiations to renew industry-wide collective agreements concluded at the national level. Secondly, special cooling-off procedures were envisaged to prevent excessive use of industrial action and to ensure full compliance with the terms of collective agreements.

CHAPTER TWO SUPPLEMENTARY COLLECTIVE BARGAINING IN THE SHIPBUILDING INDUSTRY

1. Economic Crisis and Business Restructuring: Collective Agreements concluded by Fincantieri in the 1980s 1.1. Reorganisations and Plans to Restructure the Shipbuilding Sector: The 1984 Reorganisation Plan and the Creation of Società Operativa Fincantieri 1.1.1. The Economic Slowdown faced by the Shipbuilding Industry The analysis of the major overhaul involving the shipbuilding industry shall begin by considering the severe economic recession that took place in the 1970s. At the time, a profound international crisis hit national industry, the result of the oil price shock subsequent to major upheaval in the Middle East. The abrupt interruption of oil supplies triggered a financial slowdown that affected all industries at the international level. In Italy, the most serious implications of the crisis were felt in State majority-owned companies. While employers in the private sector soon viewed sound financial management and restructuring as viable options to tackle the crisis, the difficulty to assimilate concepts like “entrepreneurship” and “publicly-owned companies” in State majority-owned companies made it more difficult to identify timely measures to ensure sufficient levels of competitiveness. Therefore, the lack of a well-established entrepreneurial and innovation culture acted as a major hindrance to seek solutions to step up IRI members’ competitiveness and efficacy in their own markets. In the second half of the 1970s, Italy’s shipbuilding sector was also affected by the economic recession. Nevertheless, the major organizational changes occasioned by the “Piano Caron” and the creation of Società Italcantieri in the 1960s had ensured the sector high levels of demand in terms of shipbuilding. This state of affairs, coupled with a renowned spirit

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of innovation resulting from the introduction of new technologies aimed at increasing production, enabled the shipbuilding industry to report positive trends from 1970 to 1975. Specifically, at the start of 1973, newly-born Società Italcantieri managed to offset profits and losses to increase production orders (see Tab 1). Tab. 1: Italcantieri’s Financial Figures Year 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976

Income 83.8 104.3 103.2 132.4 137.9 156.3 205.0 220.8 252.0 293.8

Investments 8.8 11.2 5.1 3.8 4.0 4.4 7.5 10.3 9.1 12.3

Amortisation 2.5 2.6 2.3 4.1 4.2 4.3 6.9 7.3 7.5 8.8

Profits/Losses 0.01 -1.0 -7.2 -9.6 -12.0 -7.5 -0.02 0.1 -0.01 -5.9

Source: P. FRAGIACOMO, L’industria come continuazione della politica. La cantieristica italiana 1861-2011, Franco Angeli editore, Milano, 2012, p. 218.

Due to the fact that the sector gained new momentum in Europe, Italy’s shipbuilding industry developed significantly in the first half of the 1970s, gaining ground against its Asian competitors. However, the restructuring plans taking place as early as the 1960s did not help Italy to increase production in such a way as to generate tangible results in terms of employment opportunities and economic returns. Blatant shortcomings in terms of efficiency and technology, and the gap between demand and supply were the main reasons of the economic crisis affecting the sector between 1970 and 1980. It was precisely in the heyday of the shipbuilding sector in Italy and the rest of Europe that the effects of the energy crisis following the Yom Kippur War became more visible. The shipbuilding industry in Italy, which only a few years before had seen a considerable rise in productivity, suddenly found itself struggling as a result of a fall in demand. This aspect, along with increased competition (e.g. South Korea) in the target market, affected the finances of shipbuilding companies, all of which were under the control of IRI. Unlike previous economic crises affecting the sector, it was not a question of putting in place measures to

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increase employers’ levels of technology or efficiency to vie with an increasing number of competitors, especially in the Far East. The main problem at the time was the lower demand for shipbuilding which, lacking signs of recovery, led to the largest companies in the sector to seeking solutions concerning rationalization and redetermination of supply. This need was also brought up by the European Community, which devised “rescue plans” to assist Member States in implementing workforce rationalization schemes in the shipbuilding sector. Specifically, the Economic European Community put forward the so-called Davignon Plan to support the shipbuilding sector in Europe, also because of the resistance of Eastern countries to determine fair and uniform costs for ship production following the oil crisis at that time. The Davignon Plan entailed giving out substantial financial aid to Member States, provided that they pledged to rationalize and rethink the whole European shipbuilding sector to make it more suitable for production expected between 1980 and 1985. The message the Community intended to spread was that it was necessary to take prompt action to reduce the workforce in the largest shipbuilding companies in Europe, even by means of unpopular decisions causing serious consequences in social terms. As one might expect, this plan had little success as it was opposed by most EC countries, among which was Italy. Their stance was not the result of their reluctance to promote measures which clashed with the ideas of employers and trade unions. Rather, they were convinced that setting in motion a major restructuring plan would have prevented companies in the shipbuilding sector from handling production peaks at the end of the economic recession. In Italy, the proposal put forward by the EEC also took the form of requests made to the Parliament to amend the Davignon Plan. In the following year, that is in 1978, the European Community made available further resources to employers in the shipbuilding sector by passing the socalled “IV Directive”, which differed from the Davignon Plan because of the purpose of the financial support provided. The latter highlighted the need to devise rationalization schemes to reduce supply and to align shipbuilding in Europe with new industrial demand. Instead, the IV Directive also focused on improving the quality and technology of European production to encourage new forms of competitiveness in target markets. Accordingly, through this second provision, it recognized that engaging in a “price” battle with Eastern competitors was not sufficient, but it was necessary to focus on higher quality and technological advantage to make European shipbuilding more appealing to global clients. The wealth of knowledge and the precision of European manufacturing aimed at

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challenging the leading role played by Eastern competitors in the shipbuilding industry and at offsetting the fact they could manufacture products more quickly and sell them at a lower price. 1.1.2. In Search of Solutions to the Crisis: The “Sector Plan” in Italy’s Shipbuilding Industry Naturally, Fincantieri was also hit by the economic slowdown referred to above, especially by a sudden drop in demand. The company found itself in a dire situation affecting both its finances and production. Compounding the picture was the fact that Italy’s shipbuilding sector lagged behind as regards the introduction of new technologies that were thought to increase productive efficiency and also because the market boom taking place between the 1960s and the 1970s did not benefit the sector. The first years of the international crisis were well managed by Fincantieri, especially because of the significant number of orders commissioned by the Italian Navy which enabled the company to balance demand and productive capacity. In the latter half of the 1970s, the recession affecting the shipbuilding sector in Europe was also felt in Italy. Fincantieri’s internal organization prevented it from setting in motion anticrisis measures, therefore the company faced a sudden fall in demand without any tool to cushion the impact of the recession. Adding to this was the fact that the company was already in the red and that IRI had supported it financially on many occasions. The financial situation of Italy’s shipyards started to enter the political debate in 1978, that is when it became clear that a restructuring plan was needed to access financial aid made available by the European Community. As already seen, European institutions made the allocation of financial resources to Member States conditional on the setting up of reorganization and restructuring schemes. This was a necessary condition to strike a balance between supply and extremely low demand in the industry. The Italian government promptly took action and set up an ad hoc Commission (Commissione Interministeriale) tasked with examining the reasons behind the shipbuilding industry’s low development levels and whether a restructuring plan was necessary. Like the premises to the 1978 “sector plan”, the Commission’s conclusions were clear in outlining the main problems of Italy’s industry: productive capacity exceeded demand, and shipbuilding capacity was far higher than that needed for future production. The Commission itself stressed that the grave recession of the shipbuilding sector called for prompt action on behalf of the government, which could take two forms. Trade unions and other social bodies argued

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in favour of limiting restructuring to the strict minimum, hoping that an increase on the demand-side would lift the sector out of the crisis. An alternative to reorganization was reducing production, as the current state of the shipbuilding industry would lead to a downward shift in the demand for ships. The latter option was supported by Vittorino Colombo, the then Minister of Merchant Navy. Consequently, the Italian government established a “sector plan” taking into account the findings of the Commission and in order to secure the EC’s generous funding to support the shipbuilding sector in Member States. The restructuring plan referred to above consisted of a major overhaul of Italy’s shipbuilding sector. As the government intended to renew its military fleet, companies building ships for military purposes were not affected by the plan. Since most of production took place in plants located along the Tyrrhenian Sea, this move produced positive implications for military shipbuilding companies based in the Liguria Region. Conversely, the document issued by the government called for the need to shut down a number of small and medium-sized manufacturing plants (e.g. those of Navalsud and Pietra Ligure) to scale down national productive capacity. Therefore, the aim was to give way to the most productive manufacturing plants that could embark on large-scale building projects and to close down those that were unable to ensure sufficient output levels due to intense competition. As for business diversification, it was decided that an investment in the Palermo-based plant would play a strategic role in the provision of ship-repair services. Nevertheless, some adjustments in terms of infrastructure were needed to improve performance, along with massive labour shedding to adapt production to future demand. Consequently, the freezing of staff turnover and the closure of plants brought about a fall of 3,000 workers in the number of those employed in the shipbuilding industry. As one might infer, the plan just described was met with criticism by the Parliament and trade unions. The latter initiated protests that pressured institutions into halting or amending this restructuring scheme to prevent serious effects on employment. Therefore, on the one hand, awareness arose that the shipbuilding industry was in need of a thorough overhaul to satisfy new market needs. On the other hand, the restructuring plan put forward by the government complied with the requirements of the EEC, though failing to assess possible social consequences. These feelings of resistance, coupled with the change of the government in office taking place while the plan was under scrutiny, produced delays

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in its finalization. Further, the version approved by the Parliament presented major differences from the one tabled by the Minister of Merchant Navy. Specifically, the new version of the plan contained a set of measures acting on the national shipbuilding system but not on the workers. This was done to improve efficiency whilst hoping for the sector to recover, as was expected to happen within the 1980s. Unfortunately, this was far from the case, thus Società Fincantieri had to take serious steps to avoid the worst. 1.1.3. Società Fincantieri’s Restructuring Plan: Main Features The “sector plan” put forward by the government and endorsed by the Parliament, although undergoing major changes, had little effect and somehow clashed with the stipulations provided by the EC institutions. Elsewhere, painful, large-scale restructuring took place between the end of the 1970s and the start of the 1980s, which was followed by the closure of many plants or the reduction of their productive capacity. This was far from the case in Italy. The enormous social pressures faced by lawmakers prevented them from seeking the most appropriate solutions to overhaul Italy’s shipbuilding industry. More generally, one might note that the measures initially proposed by Minister Colombo were essential, not so much to attempt to regain competitiveness as to ensure the very survival of the shipbuilding industry in Italy. The first years of the 1980s did not bring significant changes in terms of ship demand, to such an extent that Fincantieri struggled to stay afloat. This was also due to the fact that the EU’s financial aid was not sufficient to relaunch production and to benefit the company in terms of profitmaking and efficiency. This state of play was even more disheartening when the recession was taken into consideration. Between 1970 and 1980, the IRI Group was affected by a crisis that led management to take serious steps, among others selling off branches and business diversification. As already seen in Chapter I, under the leadership of the newly-elected IRI President, Romano Prodi, an attempt was made to foster a new entrepreneurial spirit helping healthy companies to make profits. Efforts were therefore made to reassert the principle that markets were extremely competitive, overturning the well-established assumption that State majority-owned companies could always rely on generous public funding. In this respect, Fincantieri was itself seen as in need of a major overhaul to satisfy new market needs. By the 1980s, Fincantieri was all but an organization that could cope with a slump in demand.

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With some 35,000 employees, 10 operating companies, and 17 manufacturing plants, Fincantieri could not afford a massive reduction of orders and concurrently ensure business efficiency. Orders to build military ships received by the government, although useful to reduce the company’s financial distress, were insufficient to ensure the leading company in Italy’s shipbuilding industry a rosy future. Accordingly, in 1983 Fincantieri decided to draw up a recovery plan to make adjustments to its structure to suit changed market conditions. The aim of the plan was to provide Fincantieri with a leaner organizational model to restore productivity, efficiency, and competitiveness. Evidently, fierce competition from Eastern countries (particularly South Korea) made it essential to prioritise high quality rather than lower manufacturing costs. A detailed analysis of the plan submitted first to the majority shareholder (IRI) and then to unions in the shipbuilding sector (Coordinamento sindacale della Navalmeccanica) revealed some interesting aspects. First, the document pointed out that the most important provisions contained in the sector plan proposed by the state neither produced the expected results nor improved the state of the company compared to previous years. Although Fincantieri’s operating companies endeavoured to improve efficiency and reduce costs, there was no sign of recovery. In passing, a comparison made with the shipbuilding industry in a number of European countries stressed that, for example, Germany had long put in place a reduction of productive capacity and specialized staff. The restructuring plan envisaged was in line with the EC indications and led to the dismissal of many workers. Still, from a comparative perspective, the document produced by Fincantieri also indicated that France had to deal with a massive drop in production (-52%). Accordingly, like many other countries in Europe, France began to reorganize companies, by also merging them, and drafted a restructuring plan aimed at increasing their productive capacity. The UK did not manage to escape the crisis, either, seeing that according to the document submitted by IRI, the shipbuilding industry lost some 29,000 jobs. UK institutions finalized their restructuring schemes to keep their long-standing manufacturing plants open. 1.1.4. The Goals of Società Fincantieri’s Restructuring Plan In more practical terms, it was once again stressed that the failure to meet the objectives laid down in the “sector plan” was due to the will to reduce productive capacity without taking steps to improve shipbuilding infrastructure. However, the restructuring plan moved in that direction, for it was aimed at fine-tuning facilities in each plant in order to adapt them to

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the actual needs of the market. This way, rationalization was sought while safeguarding the technical know-how needed to handle those orders expected by the end of the 1980s. More specifically, a number of objectives were set down that had to be fulfilled in order to ensure efficient production, among others: implementation of a single type of production; on-the-ground transfer of on-board manufacturing processes through detailed planning; focus on core business; reduction of in-house production; the use of outsourcing to meet peaks in demand; reduction of manufacturing lead times through higher interaction of planning activities (both basic and implementation ones); implementation of standard projects and simplification of technical documentation. Significantly, the processes outlined drew largely on the guidelines laid down by the EEC. In particular, emphasis was given to the need to reduce the shipbuilding industry’s productive capacity, bringing it into line with demand in those years. Moreover, drawing on what had been already done at the beginning of the 1980s, it was urged to further rationalize the number of managers in order to speed up decision-making. Of course, cooperation with trade unions was also relevant as a way to plan the economic and productive aspects necessary to boost the shipbuilding sector. It was against this background that the influence exerted by IRI on its members clearly emerged. The need of employers and the social partners to work in harness was forcefully reiterated by Romano Prodi following his appointment as IRI Group President, as a way to revive the shipbuilding industry and help Italy to compete in international markets. Returning to the restructuring plan, a close examination of the activities carried out by Società Fincantieri was also included therein, to understand the actions needed to balance supply and demand. Overall, it was calculated that each plant needed to manufacture at least 225,000 compensated gross tons (CGT) to satisfy the demand for merchant and military vessels, ship repair or conversion under normal circumstances. However, 190,000 CGT were thought to be sufficient to meet demand at the time, so at least one plant needed closing down to adjust productive capacity. A number of aspects, for instance the local productive context and the status of infrastructure, were factored in when choosing the facility that had to cease operation. As a number of Fincantieri plants were already based in Liguria, it was agreed to close down the one located in Sestri Ponente. Regarding investments, the changes to be made to each plant were specified to increase efficiency, although the most important measure was undoubtedly the one aimed at reviewing Fincantieri’s organizational model. As seen, at the start of the 1980s Fincantieri was made up of many

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operating companies working in 17 production sites. Far from being a lean organization, this structure prevented Fincantieri from adapting to those rationalization processes already in place outside Italy. For this reason, the new restructuring plan intended to create only one operating society with four departments (concerning merchant vessels, military vessels, ship repair, and ship motors) to which management in each plant had to report. The latter were also grouped together according to their core business, giving rise to an utterly new organization based upon three levels: the main administration, four departments and 16 production sites. In theory, this new model would have provided Fincantieri with a new and more efficient manufacturing system, also because the presence of one operating society allowed for centralized accounting and less administrative staff. On this point, Fincantieri resembled a private-sector company, where decisions regarding development and planning were made at the central level and according to production and efficiency goals. The role of the departments referred to above was particularly pregnant, for they served as intermediaries between the main administration and the shipyards. On the one hand, departments monitored operations at plants, making sure production planning was complied with; on the other hand, they actively collaborated with the central administration, devising plans and policies helping company development. The tasks assigned to the departments were nicely laid out in the restructuring plan, in which it was stressed that: “on the one hand, they define objectives, while on the other hand, they set down operational measures and appropriate resources”. The newly-created society also reasserted its commitment to conducting research through coordination activities carried out by CETENA – a firm that specialized in research in the shipbuilding sector – which, however, was a separate legal entity from Fincantieri. Finally, the restructuring plan also specified that the measures put in place would enable the company to significantly reduce staff. Specifically, the restructuring process would have involved 6,500 workers; 55% of them were thought to leave employment either because they reached retirement age or because they resigned voluntarily, while training was set up for the remaining 3,000 workers to help them find work following termination. 1.1.5. Società Fincantieri’s Restructuring Plan: The Agreement of 30 June 1984 The restructuring plan, initiated in 1983 stretched into the following year. On 30 June 1984, a merger agreement was concluded regulating Fincantieri’s acquisition of the eight largest operating societies in the

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shipbuilding industry. The new Società Fincantieri – Cantieri Navali Italiani S.p.A. was then established, with its status that changed from a financial holding company to a fully-fledged operating society. This conversion also had consequences on the Sesti-based plant, which was already scheduled for closure. When formalized in 1983, this move was met with protests by trade unions, intimidating IRI management and leaders. As a result, the IRI President felt compelled to announce that all factories would remain in operation and that manufacturing would be balanced among all Fincantieri facilities across Italy. This decision called for a review of the restructuring plan so as to include the Sestri-based establishment, which was set for diversified production. As will be seen in the following years, this project did not come to fruition, so shipbuilding resumed at this facility. Moreover, the document submitted by Società Fincantieri to Coordinamento Navalmeccanica – FLM on 21 June 1984, that is nine days before the conclusion of the merger agreement, contained some major provisions particularly in relation to the tasks assigned. The main administration was in charge of planning operations in target markets, efficiently organizing resources and supervising all those aspects that could not be dealt with by other divisions. As for the departments, they were tasked with developing products and the business according to their specialization, managing production for each production site, optimizing resource allocation, promoting possible synergies between productive units within the same department, handling all elements of cost and revenue, and coordinating different production units. Operating companies were given specific tasks concerning product manufacturing, that had to comply with precise standards in terms of quality, time of delivery, resources, and possible modifications. The newly-created Società Fincantieri was fully operational after the conclusion of the merger agreement referred to above. One aspect that is worth mentioning that stirred controversy, particularly in the shipyards in the Liguria Region, was the decision to move the company’s registered office from Rome to Trieste. Therefore, 1984 saw the start of a lengthy reorganization process involving Fincantieri and Italy’s shipbuilding industry, more generally. The changes that ensued considerably reduced productive capacity while increasing efficiency and ensuring a prosperous period, especially in the 1990s.

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1.1.6. Government Stance and Decisions on the Maritime Economy In parallel with the changes undergone by the Italian shipbuilding industry, the government discussed a new plan to support the so-called “maritime economy”, which also concerned harbours, maritime property and fishery. In particular, a Protocol was concluded on 27 November 1984 that, drawing on the “Piano Carta” agreed upon some years earlier, laid measures to review the national fleet, particularly in relation to the use of new technologies. Among other things, this Protocol was a useful instrument to help the sector deal with regular drops in demand. It was a fully-fledged agreement concluded by representatives from industry, ship operators, and trade unions, by means of which the parties pledged to actively collaborate to increase competitiveness of the maritime economy. Specifically, the government committed to law-making to set down rules to revamp this sector, while allocating further resources to modernize maritime infrastructure and dry docks. As for ship operators, they welcomed new orders for shipbuilding, to be agreed upon with the social partners and taking into account the productive capacity of the companies concerned. Fincantieri reiterated its willingness to cooperate with trade unions to seek necessary solutions to revitalize the shipbuilding industry and to ensure stability of employment to those workers that were placed on temporary income support because of the economic crisis. Another major feature of the Protocol was that Società Fincantieri committed itself to distributing job orders evenly among all production units in Italy. This also confirmed the relevance attached to the Sestri-based establishment: once seen as the factory doomed to close down, it was now viewed as a specialized manufacturing site in the shipbuilding industry.

1.2. From Reorganisation to Productivity-based Pay: The Agreement of 14 October 1986. 1.2.1. Measures Concerning Organisation and Skills laid down in the Agreement of 14 October 1986 The 1984 reorganisation process brought uncertainty over the future of Fincantieri. The company’s new structure, the fact that many societies merged into one, massive restructuring and outsourcing raised many doubts among workers, middle and top managers. Accordingly, in the period immediately following the establishment of new Società Fincantieri, both workers and trade unions made attempts to digest the changes underway and appreciate their actual potential and implications.

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While it was clear that change was necessary in Società Fincantieri, many were under the impression that reorganization was put in place merely to comply with EC recommendations, without taking cognizance of its effects, particularly as regards employment. Of course there was an awareness of the importance of EEC funds, yet those concerned, especially trade unions, lamented that the measures agreed upon could produce operational shortcomings preventing the shipbuilding sector from fully recovering. In commercial terms, the sector reported fast growth in the number of orders in the mid-1980s, because of the commitments undertaken by the government at the time of concluding the 1984 Protocol concerning resource allocation. Most commissions involved military ships and enabled Società Fincantieri to remain competitive amid the recession that was affecting Europe. As will be seen, the late-1980s witnessed the abrupt end of this peak in demand, with Società Fincantieri once again facing a period of recession. In 1986, that is two years from the start of the reorganization, Fincantieri’s organizational structure was completely new, especially in terms of employment figures. Indeed, the number of workers was far lower than in the past: 23,000 workers in the mid-1980s against 30,000 in 1980. Further, another company-level collective agreement was about to be finalized that was said to bring about many changes to the company. Accordingly, on 14 October 1986, Fincantieri, INTERSIND, and trade unions gathered to sign an agreement ensuring continuity in the reorganization process initiated two years before. On this point, the document clearly stated that the parties intended to speed up the reorganization underway, aligning strategies with market changes to seek productivity. The signatory parties also voiced the need to meet on a more regular basis to make ongoing changes to the objectives already set out, conform to the requirements of European institutions to obtain funding, and to bring production and corporate strategies in line with Italy’s maritime economy. As far as rationalization of staff was concerned, the aim was to come up with useful solutions to help workers facing dismissal to deal with this situation proactively. This aspect was relevant in that it evidenced the parties’ efforts to collaborate following the conclusion of the 1986 agreement. This sentiment was also a consequence of the 1984 IRI agreement, that focused on the need to promote cooperation between employers and the social partners to put in place measures helping the sector to thrive. More generally, the 1986 agreement was part of Fincantieri’s restructuring plan, set in motion to cope with a crisis that called for a major overhaul of the shipbuilding sector to restore efficiency and productivity.

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One distinctive trait of the agreement was its far-reaching nature, seeing that it affected aspects like work organization, professions, working time, investments, training, and productivity. As for work organization, steps were taken to make those organizational processes, started two years earlier fully operational, while implementing strategies to optimize the use of the workforce, improve competitiveness and reduce order lead times and production costs. To this end, the Direzione Costruzioni Mercantili (“Department of Merchant Shipbuilding”) set forth that “on-board activities concerning hull construction and outfitting should be moved on the ground” and that “work performance shall be increased by optimizing the use of the workforce”. Conversely, in relation to the Direzione Navi Militari (“Department of Military Shipbuilding”) the focus was on organizing manufacturing sites differently to give them as much autonomy as possible during the different stages of production. The way shipyards were structured also underwent change to enable them to meet new needs resulting from the reorganization scheme and the market, while attempts were made at reducing indirect costs by insourcing assistance services and rationalizing monitoring procedures relative to production. The Direzione Riparazione Navali (Department for Ship Repair”) also stressed the importance of reorganizing production according to each manufacturing unit. Accordingly, three main production sites (the centre for on-board operations, the centre for land operations, and the centre for general services) were identified to boost production. Most measures laid down in the 1986 agreement concerned training. Providing employees with high level of skills was regarded as a necessary step to help the company recover lost ground in the market. In this respect, the idea was to provide the company with more versatile employees who could carry out several assignments to move beyond the rigid classifications imposed by law regarding tasks and thus promoting more flexibility. The underlying principle was that staff that could fulfil different assignments had to be involved in several production processes. Accordingly, new professions were created in different departments, by also merging similar ones. So, for example, old occupations like the “draftsman”, the “machine operator working in the shipyard”, the “ship joiner”, the “light-duty joiner”, the “locksmith”, the “solderer”, the “caulker, the “welder” and “staff supervising temporary shipyards” were brought together to form the “joiner”. From this moment on, and after undergoing training, joiners had to be able to perform all the tasks usually carried out by each component making up this new professional group. As this was a delicate issue, the signatory parties also committed themselves

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to holding meetings in each productive site and to reviewing employees’ grade level, whereas necessary. In relation to working hours, Società Fincantieri and the social partners agreed that it was advisable to introduce new flexible working time arrangements to strike a better balance between contracted hours and those actually worked to step up productivity and competitiveness. This strategy also afforded the opportunity to determine the start and the end of working shifts in each production facility based on specific needs. Due to its peculiarities, flexible forms of work were introduced in the Department for Ship Repair to drop costs by reducing overtime work and downtime. In this respect, it was established that working time in each productive site could be organized considering a working week of six days or a longer period, while employees in productive sites, where shift working was not implemented, were even allowed to work different hours. The provision of more flexible working schemes was therefore seen as a fundamental element to challenge competitors in target markets, for they made it possible to reduce lead times while ensuring high-quality manufacture. As for investments, the 1984 agreement specified that the company’s reorganization could rely on generous funding appropriated over a threeyear period (1986-1988). The financial resources were used to buy technology and to renovate shipyards to adapt them to new productive cycles. This new equipment was particularly important, for in the past the lack of updated technologies frustrated the company’s efforts to compete at the international level. By way of example, new infrastructure and stateof-the art machinery were made available at the shipyards used by the Department of Merchant Shipbuilding. Similarly, investments in engineering centres were used for purchasing technologies and IT tools and to widen access to (CAD) computer-aided design software. Training was also high on the agenda of new Società Fincantieri. As seen, training was important also because many old occupations were merged and workers needed to have the same skills level. For this reason, the parties to the agreement set up training programmes involving four departments and their staff, namely: 1,300 workers from the Department of Merchant Shipbuilding, 200 workers from the Department of Military Shipbuilding and that of Large Ship Motors, respectively, and 1,400 employees from the Department for Ship Repair.

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1.2.2. Remuneration and Productivity: The Agreement of 14 October 1986 The last aspect that was dealt with in the Agreement of 14 October 1986 concerned new rules on productivity and marked a turning point in pay management in Italy’s shipbuilding industry. Specifically, a first attempt was made at adding a variable component to staff remuneration. While a minor step towards the implementation of performance-based pay, this move was certainly a timely one and in line with the major changes undergone by the shipbuilding sector at the time. In other industries discussions were also ongoing about the advisability to put into effect remuneration schemes based on the fulfilment of certain goals in terms of efficiency and competitiveness. Therefore, the parties to the agreement acknowledged that previous initiatives put forward regarding organization, skills and infrastructure enabled the company to significantly increase productivity. Accordingly, it was also fundamental to introduce remuneration policies that were suitable for the changes referred to above, among others special bonuses to reward workers. Management and trade unions agreed to fine-tune a mechanism “linking remuneration to productivity”, breaking it down into two components. The first one consisted of a fixed amount of money (30,000 liras, as adjusted considering job grade no. 3) that all staff would receive starting from 1 October 1986. The second component was a variable one and was granted to workers starting from 1 March 1987. The decision to allocate the variable item of remuneration some months after the conclusion of the agreement could be explained by the need of the parties to set up a joint body tasked with devising a system to measure “productivity and efficiency”. One of the main objectives of this new remuneration scheme was to involve all those engaged and to reward staff in relation to their actual support to regain competitiveness. The 1986 agreement signed by Società Fincantieri and the social partners was thus a major step in the reorganization process that had started two years before and that ended at the beginning of the 1990s. Through this arrangement, the parties reached full agreement to carry forward far-reaching changes in the company, by regularly exchanging ideas on the efficacy of the provisions laid down. As discussed, the 1986 agreement was a stepping stone to introducing performance-based remuneration in Italy. One might note that the agreement did include provisions on variable pay in a strict sense, for a part of workers’ remuneration was paid considering a rise in productivity, without however identifying the criteria used to assess it. Yet the agreement bore relevance just the same, as it hinted at the willingness of the parties to make some remuneration items dependent upon workers’

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performance. Therefore, the company agreed to pay workers a bonus upon fulfilment of a number of objectives set forth in advance.

1.3. Performance-based Remuneration Systems amid Improved Relations between Fincantieri and Trade Unions: The Agreement of 30 September 1988 1.3.1. Cooperation and Participation as Underlying Principles of the 1988 Agreement. The profound crisis hitting Italy’s shipbuilding sector at the end of the 1980s – as well as some leading shipyards operating in the Far East (e.g. Daewoo in Korea) – was the result of ill-judged policies put in place by the industry’s leaders, causing ship prices to decline and seriously affecting many production sites. In Europe, one way to cope with the economic downturn was to rely on financial aid from the EEC, which, however, established a number of conditions to access it. Specifically, while the maximum amount of allocable funds was the same for all Member States, this threshold could be adjusted depending on market conditions. As for Fincantieri, the efforts made by management in mid-1980s aimed at strengthening the company’s positioning in the target market came to nothing, especially in terms of financial outcomes. Worldwide, the shipbuilding industry had been negatively influenced by low demand and shortcomings in strategies to meet new market needs. For example, Italy’s veto on the delivery of warfare ships ordered by Iraq during its war against Iran worsened Fincantieri’s financial situation. Consequently, the company once again found itself in dire straits, notwithstanding attempts to boost efficiency and productivity. IRI management and leaders agreed that drastic measures were needed to keep the company afloat. As production at the time particularly targeted the national market, a necessity arose to internationalize the manufacturing process and to further reduce the workforce. Attracting foreign capital and training highly-qualified staff were seen as the main ingredients to help the company rebuild its reputation in the international market. Evidently, these measures needed to be shared and discussed with the social partners, thus favouring company competitiveness. Originally, trade unions were mostly tasked with monitoring working conditions and preventing dismissals. Subsequently, union leaders were encouraged to collaborate with management and discuss decisions and strategies benefitting the company, even those concerning restructuring. Undoubtedly, this approach was favoured by the

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IRI Protocol, the latter being based on collaboration between the parties as a way to recover efficiency and productivity. Against this background, Fincantieri and trade unions concluded a landmark agreement on 30 September 1988 that would play a major role in the company’s future development. The 1988 agreement laid down a number of objectives helping the company to regain ground lost to competitors, among others: initiating restructuring and increasing productivity in line with price-competition; prioritizing added-value production by also considering benefits resulting from know-how and technology use; exiting non-sustainable business areas; seeking more international partners to share the costs of product development and increase overall efficiency. According to management and trade unions, this strategy would help Fincantieri be more competitive in target markets and favour more adequate planning in the medium and the long term. A closer look shows that collaboration was the watchword of the agreement. The need was reasserted to tackle the international crisis affecting the shipbuilding sector. To this end, special attention was given to activities like ship repair and conversion. Regarded as marginal activities by the EEC, they were excluded from fund allocation as set forth in the VI Directive, and EEC institutions that even recommended Member States to dismantle ship-repair and conversion facilities. Later on, faced with an ongoing crisis, funding for shipbuilding progressively shrunk, leaving companies in the sector no other choice but to engage in massive restructuring. Employers voiced the need of national policies facilitating the restructuring process. Specifically, new laws were necessary in Italy’s shipbuilding industry to align it with EEC legislation. Further, it was crucial to set in motion an organizational model based on new skills and serving as a catalyst for productivity growth. Furthermore, it was reasserted that international competitiveness required Fincantieri a more flexible organization to speed up production. Finally, and as already seen, it was also advisable to establish a more participatory industrial relations system where all actors shared responsibilities and common goals. The aspects just outlined had to supplement the new strategies put in place by Fincantieri. Commercially speaking, this translated into internationalizing production and focusing on the most relevant markets. This was a major issue, especially because EEC institutions did not view ship repair and conversion as profitable market segments, though they involved one of the four company departments. Moreover, the measures agreed upon by Fincantieri and trade unions needed to be accompanied by

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strategies concerning external costs. The idea was “to share with suppliers the risks concerning supply”, for instance by creating “collaborative platforms to recoup costs”. Equally interesting was the reference to workers’ involvement in restructuring and reorganization processes. The 1988 agreement specified the significance of relying upon workers’ full collaboration to pursue the objectives set down. This also sounded as a message for trade unions, which had major responsibilities in clarifying that the steps taken, however drastic, were adopted for the benefit of the company. On this point, Bernardo Vittorio, the then Head of Human Resources and the person in charge of dealing with work-related issues, pointed out that “the effort from trade unions to accept the restructuring plan, also in ideological terms, is essential to allow Fincantieri to deal with a persisting economic crisis”. As discussed earlier, the strategies laid down in the 1988 agreement needed to be accompanied by a 40%-50% increase in productivity to succeed. The objective to raise productivity was a challenging one and was pursued through rationalization policies concerning a number of aspects (employment levels, decentralization of production, business organization, investments, and systems linking remuneration to productivity). In relation to employment, the 1988 agreement took a completely different approach from the ones concluded in the first years of the 1980s. Unlike in the past, the aim of Fincantieri was not to dismantle facilities operating in Italy, but to reduce its workforce, provided that each productive unit achieved the objectives laid down in terms of productivity. Both management and trade unions agreed that there existed a surfeit of workers, particularly when compared to production needs. On this point, the parties joined forces and urged institutions to enforce provisions facilitating restructuring processes. Specifically, the government and the Parliament were prompted to enact a law allowing workers to enter early retirement once they reached the age of 50. In the intervening time, workers falling within the scope of application of the foregoing provision were given the opportunity to benefit from income support or job-creation initiatives, to join inter-company mobility programmes, and to access early retirement schemes and voluntary redundancy payments. The section on employment was interesting in relation to the attempt of the parties to pressure institutions into devising ad hoc measures to make restructuring less stressful for those concerned. As for decentralization of production, it was such a relevant issue that deserved a whole chapter in the 1988 agreement. The outsourcing of certain activities was regarded as a necessary step to reduce costs. The tasks that were contracted out were

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marginal or of an occasional nature and could be expensive if performed internally (e.g. hydraulics). The 1988 agreement specified that outsourcing mostly concerned ship-repair and conversion services. Consequently, and under special circumstances, it was agreed to outsource certain tasks to external entities operating within the company, so long as Fincantieri committed to closely monitoring their work. Monitoring concerned aspects like compliance with safety rules and obligations related to remuneration and social contributions. With reference to organization, the 1988 agreement reasserted the need to press on restructuring with the view of pursuing efficiency. In particularly, while in the past internal production was based on “production centres” and “workshops”, now the focus turned to “production lines”. The aim behind this organizational model was to create a sort of “microbusiness” comprising all those resources used to pursue the objectives laid down. Each production line was also accountable in terms of outcomes, an aspect which led to further synergies. The other purpose of the 1988 agreement was to bring into completion the investment plan laid down in the previous agreements, particularly by implementing new technologies to regain efficiency and productivity. Attempts were also made at creating production sites better aligned with demand, taking into account the need to maintain working conditions and occupational health and safety to the required standard. 1.3.2. The Agreement of 30 September 1988 and the Introduction of a “Measurable” System of Variable Pay The most significant aspect of the 1988 agreement concerned the proposal for a variable pay scheme. Due to the need to increase productivity by 40%-50%, Fincantieri took action as regards investments and organization, and required staff to work more and better. For this reason, a variable remuneration item was introduced, called “the additional pay element linked to productivity”, the payment of which was made according to a “six-level scale to improve productivity”. The idea was to devise a remuneration system which, while involving all workers and rewarding their contribution, went beyond one’s work performance strictly speaking. The new pay scheme was implemented for 18 months on an experimental basis and consisted in a bonus associated with each level of the scale referred to above, which in turn was linked to a certain productivity target. Each scale level considered a three-month period (i.e. 18 months = 6 trimesters = 6 levels) and, interestingly, the level reached by a worker

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based on productivity became the starting level for the following three months. Accordingly, this variable pay scheme was important in that for the first time a system was in place whereby no bonuses were paid to those who failed to reach the goals related to productivity. In this regard, specific objectives were laid down in each factory and, within it, each workshop or department had to contribute to its fulfilment. The productivity level of each manufacturing plant was arrived at by adding up that of each unit, which in turn was evaluated by calculating the time provided to perform a certain task and that actually used. Through this evaluation procedure, a business component that fared well was rewarded even though the production facility it belonged to failed to meet the objectives set. For example, if a shipyard did not achieve the required level of productivity over the three-month period, but one of its business components (e.g. a workshop) had fully met its goals, workers operating in the latter would be paid 50% of the variable remuneration bonus (one might note that 15% tolerance could be applied by Fincantieri). Figure 1: Productivity Scale – Agreement of 30 September 1988

The variable pay scheme laid down in the agreement had all the characteristics to help Fincantieri recoup productivity losses and boost its competitiveness in target markets. The underlying principle of this mechanism, which appealed to the contractual parties, was that workers’ contribution was essential to its effectiveness. Besides variable pay, the 1988 agreement envisaged further incentives for workers. One concerned working hours and was awarded to employees working for 150 hours or longer. This bonus was the “special remuneration item” and did not

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include overtime. Furthermore, each manufacturing plant was allocated a monthly sum of money based on its production characteristics. This fund had to be used to supplement remuneration to increase employee productivity and performance. Finally, the productivity bonus already in place following the Agreement of 14 October 1986 was further increased. Significantly, it was also agreed that the fulfilment of the objectives related to level 5 and 6 of the productivity scale mentioned above would have resulted in a further pay increase consisting of the average amount paid for meeting levels 1 and 2 of productivity plus the productivity bonus referred to above. Furthermore, a separate document attached to the agreement also envisaged new rules on time off for trade union duties, which was agreed upon by the parties in the hope that this would be the beginning of a more participatory and regulated industrial relations system. Specifically, it was determined that each business unit had to conclude a specific agreement establishing the number of hours allowed to undertake trade union activities.

2. Amendments to and Implementation of the New Variable Pay Scheme: The Agreements concluded by Fincantieri in the early 1990s 2.1. The Struggle faced by the Ship-repair Sector and the Legitimization of the Performance-based Remuneration System: The Agreement of 12 July 1990 2.1.1. The “Document on Industrial Policy” The restructuring process, which began in 1984 and was taken forward following the 1988 agreement, certainly contributed to increasing Fincantieri’s efficiency and productivity. Nevertheless, the measures laid down had little effect and did not manage to lift the company out of the crisis affecting the entire shipbuilding sector. Fincantieri still relied on IRI’s financial aid, though a number of successful business policies enabled the company to become a leading player in passenger shipbuilding. Consequently, while Fincantieri played a key role in some markets (e.g. the production of cruise and warfare ships, notwithstanding the issues with Iraq referred to above), the negative trend reported in some other activities (e.g. ship-repair services) acted as a hindrance to competitiveness. Not to mention tensions and changes affecting Italy as a nation which began in 1990. Moreover, the country’s disheartening economic situation led institutions to promptly act to stem the crisis and

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revamp Italy’s image. Among the strategies put in place, IRI’s privatization was given the highest priority, seeing that at the time the latter only served as a financial life-saver for ailing companies within the group. The shipbuilding industry was seen as the one causing economic losses, mostly because of an imbalance between its productive capacity and ever-decreasing demand. The Green Paper issued by Ministry of Treasury even proposed that Fincantieri was “completely dismantled” to significantly reduce the debts incurred for its industrial reconstruction. It was against this backdrop that management at Fincantieri drew up a strategy aimed at ensuring the survival of the company. As a first step, a document was issued on 14 June 1990 laying down guidelines to avoid closure and to regain a leading role in the target market. To this end, it became imperative “to drastically reduce the costs of production” while increasing competitiveness of each business unit. The document reasserted the need to take forward changes to organization (by optimizing planning and recouping productivity in shipyards) and to external costs, by sharing with suppliers responsibilities concerning the provision of goods and raw material). The document also included a pledge to invest in new technologies to boost competitiveness, and made reference to “urgent decisions concerning the shipbuilding industry” resulting from the serious economic situation. Undoubtedly, this was the most important aspect of the whole document and spurred protest by trade unions. The economic situation of Fincantieri’s Department for ship-repair and conversion was disheartening, to say the least. This was mostly due to decreasing demand, intense competition, and, as seen, the unwillingness of European institutions to financially support these market segments. In reality, the goal of the EEC was the opposite: dismantling or reducing the sector’s productive capacity. It was also made clear that, according to analyses carried out by the most important shipbuilders at the international level, among the shipyards specialized in ship-repair and conversion services, only those that also engaged in building activities succeeded in remaining profitable. On this point, the document stressed that measures needed to be taken to thoroughly restructure Fincantieri’s Department of Ship-repair and Conversion in order not to undermine the slow but steady reorganization process of the company. Faced with an uncertain future, management opted to dismantle a number of shipyards – namely those based in Taranto, Naples, Venice and Genova – for they specialized in the less profitable services described above. Conversely, the production facilities of Palermo and Trieste were kept open for they could also be used for activities other than ship repair and conversion.

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2.1.2 Trade Unions’ Stance towards Fincantieri’s Document on Industrial Policy As already seen, the document on industrial policy proposed by Fincantieri led unions to take a firm stand. After carefully examining all the restructuring schemes laid down by Fincantieri, unions acknowledged the difficulties of the markets the company operated in, yet dismissing as unacceptable the strategies put forward by management. Accordingly, trade unions led by FIOM sent Fincantieri a document making clear their disapproval with company policies. After pointing out the relevance of European financial aid to boost the shipbuilding industry, unions levelled criticism at the reorganization process commenced in 1984. Union leaders lamented that the plans to merge into a single company and to centralize decision-making hampered Fincantieri’s development and affected those synergies needed to relaunch competitiveness. For this reason, decentralizing functions to each productive facility was seen as a matter of urgency, as employers in local manufacturing plants were the only ones that could assist centralised management with decision-making. Another issue that was raised by trade unions was that staff restructuring had significantly reduced Fincantieri’s productive capacity and the ability of the company to deal with future periods of high demand. Further, management was rounded on because of its massive use of outsourcing, particularly as regards technology. Accordingly, while investment in innovation was stressed to make production sites more efficient, many pointed out that Fincantieri’s strategies had favoured gradual de-skilling. One trade union organization in particular, FIOM, put forward measures to be implemented in each department of Fincantieri. As far as the Department of Merchant Shipbuilding was concerned, union representatives acknowledged the progress made in commercial terms, particularly in relation to the high demand for cruise ships. Yet they highlighted the need to keep investing in the production of merchant vessels, seeing that the cruise industry accounted for only 12% of the world’s shipbuilding industry. In relation to the department specialized in diesel engines, FIOM disapproved of the company’s lack of clear industrial policy, pointing out that sweeping restructuring processes without strategies to boost competitiveness could cause this department to close down. Concerning the Department of Military Shipbuilding, unions asked institutions to take steps in relation to national defence and the review of Italy’s naval fleet, also through cooperation with other countries to use facilities specialized in this production at their full capacity. Yet the most controversial issue concerned the department specialized in ship-repair and conversion, for

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FIOM opposed Fincantieri’s decision to leave this sector on the ground that this market was unprofitable, a viewpoint also shared by the EEC. The claim that the difficult financial situation faced by the company depended on the economic struggle in this sector was seen as simplistic and as misleading by those concerned. Consequently, unions urged the company to implement what had been already agreed upon in the 1988 agreement and to look for strategies to regain competitiveness, also in the ship-repair and conversion sector. FIM, another trade union organization, also commented on the “Document on Industrial Policy”, pointing out the remarkable effort made by Fincantieri in terms of industrial strategies and investments and praising its commercial success. Nevertheless, FIM agreed with FIOM that the measures taken by Fincantieri involving the Department of Ship-repair and Conversion were unacceptable. In the opinion of FIM, this was particularly true as regards the restructuring process. In the agreement laid down two years before, the parties had undertaken not to close production facilities in Italy to head off serious social consequences. Based on this, FIM encouraged management to ponder its decisions carefully, and to distribute job orders more evenly to prevent closures and dismissals. UILM also made known its observations on the document produced by Fincantieri. UILM was keen to point out that the increase in productivity was mainly due to the willingness of employees to work more efficiently. Like FIOM, UILM also acknowledged Fincantieri’s endeavours to invest more in the company, pointing out that restoring centralised decisionmaking had brought about more negative than positive consequences. UILM also shared the views of the other trade union organisations and opposed the closure of the Department of Ship-repair and Conversion, particularly because international investors seemed to regard these as profitable market segments. 2.1.3. Ensuring Continuity with the Past: The Agreement of 12 July 1990 All the aspects discussed in the previous chapter were included in a new supplementary collective agreement concluded between Fincantieri and the social partners on 12 July 1990. This new accord came into effect following the experimental implementation of the new remuneration system based on productivity laid down in the 1988 agreement and provided the opportunity to move forward strategies already in place in the past. The parties shared the view that the new variable pay scheme helped to increase productivity, thus now the time was ripe to apply it

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permanently, provided that a number of adjustments were made that concerned each production site and its productivity levels. In practice, this remuneration system was thought to be decisive to help Fincantieri regain ground in its target markets, and a number of amendments were made to step up its effectiveness. The changes planned covered three main areas: a) strategies were systemized enabling some production facilities to reach Level 6 of the productivity scale referred to above; b) steps were taken to allow underperforming manufacturing plants to increase productivity as much as possible c) a new information system was put forward to help workers understand the results obtained as regards productivity. As for the first aspect, one might note that another bonus was provided on top of the one described earlier to those facilities maintaining the same levels of productivity for a further two trimesters following the experimental implementation of the new remuneration system. Conversely, shipyards that did not meet the productivity levels set down in the 1988 agreement were asked to make a new attempt, while the causes for their failure were looked into to come up with effective solutions. One interesting aspect concerned the establishment of an “information system for job orders in the context of the productivity/remuneration system” (Sistema Informativo di commessa, nell’ambito del Meccanismo produttività/salario) the aim of which was to provide workers and trade unions with clear information about the status of orders and the levels of productivity achieved. Information was supplied based on three levels: the orders received, information at the workshop level and information at the shipyard level. As for the first level, once a new order was received, management of the department concerned had to give union representatives in the company: an overall description of the commission, objectives to be achieved, information concerning outsourcing (if used) and a work schedule. Once the order was processed, management had to give the union representative further information about the tasks assigned to each workshop to complete the order, along with the time needed. This had to be followed by further talks between employers and trade unions to discuss the current status of the order and the following steps to be taken. As for the second level, the new system specified that workers in each workshop or department had to be apprised of the objectives assigned in terms of productivity at the start of each trimester, while monthly information was to be provided in relation to order status and hours worked. Finally, the results achieved had to be notified to employees at the end of the three-month period. This way of providing information was necessary in that it offered the opportunity to workers to know the details

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about each order and to take time off if less hours were necessary to complete the project than those initially agreed upon. The third level was referred to as “shipyard-level information” and consisted in the provision of detailed information to union representatives within the company in relation to the results achieved by each workshop or department at the shipyard. This was relevant because, pursuant to both the 1988 and the 1990 agreements, Fincantieri had to look into the levels of productivity of each unit if the productivity plant did not meet productivity targets. Overall, one might note that the 1990 agreement aimed at establishing a line of continuity with the one signed two years earlier. Because of the satisfactory results obtained in terms of productivity, Fincantieri wished to continue along the path laid down and to favour a participatory approach when dealing with trade unions. Yet such good intentions were fulfilled only in part, as the industrial plan put forward – and the proposal to close down shipyards specialised in repair and conversion – affected relations with trade unions, with the latter that were ready to do battle to save jobs.

2.2. Employee Participation as a Starting Point for a New Variable Pay Scheme: The Agreement concluded on 9 April 1992 2.2.1. The Quest for Higher Quality: The “Total Quality” Project 1992 marked the year in which the restructuring plan started to produce significant results following a consolidation phase. Productivity was on the rise, as were efficiency and quality, enabling Fincantieri to rebuild its reputation in target markets. Despite intense competition, the company managed to carve out a leading role for itself in the highlyprofitable cruise industry. Evidently, the positive trend reported by Fincantieri over these years was also the result of massive restructuring programmes, which in turn benefitted from Act no. 223 of 1991, according to which 50-year-old workers could enter early retirement also in the shipbuilding sector. An examination of the company’s financial statements revealed that more than 5,000 workers were laid off between 1989 and 1992, bringing the total number of employees down to 15,000. Against this backdrop, and to continue along the path laid down with these changes, a new supplementary collective agreement was concluded between the company and the social partners on 9 April 1992. The most relevant aspect of the agreement was the establishment of a new mechanism to boost productivity, on the assumption that employee

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participation had to be given a major role. Fincantieri noted that worker empowerment was the ingredient to fill the existing gap with international competitors. In this respect, one might note that the 1992 agreement was built upon three main pillars: working autonomously and efficiently by reducing supervision and increasing worker involvement; setting up training plans to help workers rebuild their skills, particularly planning and manufacturing of the orders received; and increasing quality in each stage of production to reduce costs. In relation to this last point, Fincantieri devised the “Total Quality” project, which concerned workers’ full participation in pinpointing the most effective solutions to possible problems and in increasing performance. Reaching total quality was the main goal to increase the efficiency of the production unit thanks to everyone’s input. The shared effort to eliminate factors hampering development, along with attempts at raising the performance bar, were essential conditions to help Fincantieri to become more competitive in target markets. 2.2.2 Worker Participation as an Essential Feature of the New Performance-based Remuneration System As already discussed, the adjustment made to the remuneration item linked to productivity was a major element of the 1992 agreement. The significant results produced by this system prompted the parties to define new objectives as a way to further consolidate what had been achieved so far. A new remuneration system based on productivity was therefore devised drawing upon what had been laid down in the 1988 and 1990 agreements. The main difference with the past concerned the willingness to “involve workers in the achievement of the company’s qualitative and quantitative objects”. Consequently, new working areas were identified in each workshop (micro-structures) to which new objectives were assigned. The value used to assess one’s productivity corresponded to a number of levels on the scale laid down in the Agreement of 30 September 1988. To help those shipyard workers who struggled to keep up with the level of productivity required, two lower levels were created between Level 5 and Level 6 of the productivity scale referred to above, which would constitute the starting points of the new system of variable pay. The assumption was that each production site had to reach at least Level 6 of the scale mentioned above, although higher objectives were laid down to increase internal competitiveness. Unlike in the past, the new levels of productivity achieved no longer corresponded to a value on the productivity scale, but made up a sort of curve to which bonuses were assigned (see the figure

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below). This system was known as “area productivity”, for each area coincided with a recovery curve – which was divided into twenty points – so that the value of all curves produced an average productivity growth of 20%. The value of productivity in each area and for each trimester was arrived at by considering the hours worked to perform tasks and those assigned in each department. This move ensured more precise information in relation to productivity rises. A further aspect concerned pay increases, which depended on one’s productivity and were calculated according to the hours actually worked and the employee’s job grade. Figure 2: Productivity Scale – Agreement of 9 April 1992

The peculiar nature of the new variable pay scheme prompted the parties to establish a special body tasked with monitoring its functioning and the results achieved. Specifically, a commission was set up in each production site to perform the following tasks: assessment of productivity rates; identification of criteria to evaluate one’s performance and assignments; and monitoring of the development process of the “Total Quality” project. The new remuneration system was implemented for twelve months on an experimental basis and ended with a document issued by each commission pointing out its strengths and weaknesses.

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2.3. The Agreement of 4 April 1996: Productivity Growth, Innovation, and New Pay Arrangements 2.3.1. Cost Recovery and Profitability in the 1996 Agreement resulting from Organisational and Cooperative Strategies between Fincantieri and Trade Unions The restructuring and reorganisation process put in place by Fincantieri produced the most significant results in the first half of the 1900s. More flexible organisation and rising productivity enabled the company to become profitable and to balance gains and losses. As evidenced in Table 2, productivity increased steadily and reached its peak in 1992. Table 2: Fincantieri’s Financial Information Year VP VA EBITDA OI G/L 1990 2.205,8 808,3 34,5 -108,6 287,2 1991 2.650,2 959,4 109,5 28,4 174,0 1992 2.686,3 1.042,1 254,0 142,1 119,0 1993 2.646,1 967,6 238,6 191,8 3,0 1994 3.062,2 873,5 247,2 174,8 7,2 1995 3.246,6 979,2 294,2 267,8 25,2 1996 3.478,5 923,8 216,0 171,4 66,3 N.B. VP = Value of Production; AV = Added Value; MOL = earnings before interest, taxes, depreciation, and amortization; RO = Operating Income; U/P = Gains/Losses. Source: P. FRAGIACOMO, L’industria come continuazione della politica. La cantieristica italiana 1861-2011, Franco Angeli editore, Milano, 2012, pag. 289.

Optimisation of the production process, which was favoured by the relentless quest for higher quality, enabled the company to increase competitiveness in target markets. Specifically, in order to vie with products manufactured in Far East countries – which were sold at a lower cost – Fincantieri decided to stake everything on higher-quality standards. This helped the company to stand out in the cruise industry, where “excellence” was the key word to increase demand. Turning to contractual contents, the parties convened again in 1996 to discuss the terms of the new supplementary collective agreement and to take steps to maintain this positive trend. On 4 April 1992, Fincantieri and

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trade unions concluded a new company-level agreement which confirmed the terms laid down in the previous arrangements and added new provisions that depended on the trend of national and international markets. As had always been the case in agreements concluded from 1984 onwards, the parties agreed that it was important not so much to amend the terms in the text, but to ameliorate the arrangements already in force. This aspect was repeatedly stressed throughout the 1992 document, as reference was frequently made to the need to ensure the company stable competitiveness, by means of operational strategies, aimed at improving its ability to proactively respond to the special needs of target markets. For the most part, the provisions laid down in the 1992 agreement drew on the Interconfederal Agreement of 23 July 1993 and collective bargaining carried out at a national level, particularly in relation to variable pay and dialogue between the parties. On this last point, a new industrial relation system was promoted, featuring scheduled meetings between the parties to be held annually or every three months at different levels (company, production unit, etc.), to discuss issues like product planning, productivity targets, vocational training and health and safety at work. Operational flexibility was also high on the agenda, with the parties stressing the need to arrange more flexible working time and to use staff more effectively (e.g. through internal mobility) to fulfil objectives of competitiveness, quality and cost reduction. Some amendments were also made to the organisational model to comply with the objectives previously set down. Specifically, a “shorter” and “leaner” business model was envisaged – e.g. some managerial staff were seen as disposable – promoting closer interaction between suppliers and clients. Finally, Fincantieri also reasserted the need to prioritise core activities and to outsource noncore ones. Trade unions accepted this decision, as they wished to carry out these former internally so that all production sites could work at their full capacity. Indeed, such an approach contributed to cost saving and thus to fulfilling one of the objectives staked out in the 1992 agreement.

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2.3.2. New Output-based Pay: Maintaining Productivity while Establishing Profitability and Programme Indicators The 1996 agreement made use of the same variable pay schemes laid down in the 1988 and the 1992 agreements, as making a part of remuneration dependant on productivity already produced satisfactory results in the past. Two more output-based bonuses were introduced along with the one linked to productivity already in place, namely the “profitbased bonus” and the “programme-based bonus”. As previously seen, the productivity-based bonus was already provided in previous agreements and was measured in each production unit considering the hours assigned to perform a task and those actually worked. It was established that all units had to achieve Level 6 of the productivity scale laid down in the 1988 agreement. To increase productivity of a further 20%, Level 6 of the previous model was then taken as a starting point, and another 15 levels were added to the scale referred to above, coming to 35 productivity levels. As for the “profitbased bonus”, the parties introduced an indicator closely linked to business productivity, to be used on an experimental basis. It was arrived at by multiplying production output by the average paid workforce in a given year and it was paid in cases when the total was equal to or 5% higher than the value reported in the previous year. Moreover, the 1996 agreement also introduced the so-called “programme-based bonus”, which was established as a reward for meeting specific objectives, to be set by each production site in agreement with trade unions (e.g. ship launch or delivery). Overall, it was clear that the agreement of 4 April 1996 aimed at increasing efficiency, quality and productivity, and boosting competitiveness by promoting continuous dialogue between the parties. Furthermore, employee participation was a useful tool to make staff aware of the objectives related to production process. The introduction of two more output-based pay schemes attested to the will of management to go along with the innovation spirit pervading the shipbuilding industry worldwide.

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2.4. The 1999 Agreement and the Consolidation of Fincantieri’s Production Model 2.4.1. The Company’s Production Model: Employee Empowerment and Outsourcing of Tasks On 25 January 1999, Fincantieri and trade unions concluded a new agreement aimed at consolidating the business model currently in force. As was clear from the introductory section of the agreement, the parties intended to lay down provisions useful to strengthen the company’s production model, understood as “a system consisting of internal staff, outsourced work and supply”. Accordingly, and provided that full utilisation of staff was reached, management and trade unions agreed that Fincantieri’s planning and production activities had to be divided as follows: 75% to be performed internally and 25% to be outsourced, while decentralisation of production would involve the supply of components, machinery, and services. In relation to the above, management believed that most production processes, particularly those having significant added value, had to be carried out internally to preserve staff expertise. On the contrary, noncore activities had to be outsourced for economic and managerial reasons. In the agreement, Fincantieri also undertook to conduct regular checks to ensure that the companies making use of in-house facilities carried out outsourced work complying with relevant legislation. Monitoring particularly concerned the fulfilment of rules on remuneration, social security contributions, and health and safety at work. 2.4.2. The Agreement of 25 January 1999 and the Quest for Higher Productivity Besides setting forth new provisions concerning the production model, the 1999 agreement reasserted Fincantieri’s commitment to increasing productivity. While recognising that boosting competitiveness in target markets called for heavy investment in state-of-the-art plant and technology, management pointed out that “the contribution of internal staff was decisive in maximising the efficiency and effectiveness of the entire manufacturing system”. In this respect, the parties agreed on the need to look into ways to step up productivity and to increase employee performance while ensuring quality output. Further, it was also important to increase performance during working hours, for instance by reducing downtime and unnecessary requests for overtime work. To this end,

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supervision in production sites was viewed as a fundamental tool to spot possible inefficiencies or obstacles to higher levels of productivity.

3. Agreements concluded at the start of 2000: Revitalisation and Leadership in High Added-value Industries 3.1. From INTERSIND to FEDERMECCANICA: Fincantieri’s New Industrial Relations System following the Agreement of 28 October 2000 3.1.1. The New Industrial Relations Protocol laid down in the October Agreement The 1998-2000 period saw Fincantieri struggling once again, after only a few years of significant financial prosperity. In the early 1990s, management had succeeded in lifting the company out of the crisis and reviving the reputation of Italian shipbuilding worldwide. Yet, it was as though the relentless search for higher production and efficiency backfired on the company. In other words, marketing and production efforts had enabled Fincantieri to secure a substantial number of orders, to the point that demand outpaced productive capacity of either labour or infrastructure. For instance, the Monfalcone facility, Fincantieri’s largest and most representative manufacturing site, was asked to build different ships simultaneously but failed to deliver them within the agreed period of time. As the lack of infrastructure made it impossible to complete these orders in other facilities, Fincantieri had to pay heavy penalties for late delivery, further increasing losses. Another aspect that played a major role in the evolution of the company at the end of the 1990s was Fincantieri’s opt-out of INTERSIND’s national collective agreement to enter that of FEDERMECCANICA. As discussed in Part I, IRI’s winding up produced a progressive dismantling of the employers’ association representing it. The slow but steady privatisation process involving most of the companies that were former IRI members made the very existence of this representative body unnecessary. In this sense, Fincantieri and others from the metalworking sector joined Confindustria and applied the relevant national collective agreement. This move was a key point in the new sectoral agreement, which was concluded on 28 October 2000 by Fincantieri and trade unions. Uncertainty resulting from entering into a new collective agreement and major organisational changes, prompted the parties to dedicate large

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sections of the agreement to industrial relations. After describing the company’s serious financial situation – which was worsened by increasing competition in target markets – the agreement laid down what was referred to as a new industrial relations protocol, a key element of which was the willingness to promote dialogue through the mutual exchange of information on production, the objectives shared and work organisation. As was evident, the aim of the parties was to strengthen cooperation as a prerequisite to increase productivity and employee wellbeing. Furthermore, the parties also undertook to meet on a regular basis to exchange information and views on specific topics. For example, the Protocol made provisions for setting up consultation bodies grouped into observatories and committees. Examples of this included the “Joint Observatory on the International Shipbuilding Industry” (Osservatorio paritetico sulla cantieristica internazionale) – which was tasked with monitoring the latest developments in the sector which could serve as the base for future business plans – and the “Advisory Group” (Comitato consultivo di Azienda), a joint committee set up to share information on business policies, employment trends and competitive market-positioning strategies. Other advisory groups were established at an executive and plant level to discuss issues on a case-by-case basis, among others: the “Committee on aspects concerning production and productivity” (Commissione per gli aspetti produttivi e la produttività), was created to monitor productivity trends and deal with issues preventing the achievement of productivity targets; the “Committee on occupational safety and work environment” (Commissione per la sicurezza e l’ambiente di lavoro), which was entrusted with verifying compliance with relevant legislation; and the “Committee on vocational training” (Commissione per la formazione professionale), which dealt with projects intended to develop workers’ skills to increase efficiency and performance. A further aspect that is worth a mention was the paragraph specifically devoted to “cooling-off procedures”. On this point, management at Fincantieri believed that labour disputes, whether at central or a plant level, could not affect company production and reputation. In reference to this, one might note that possible legal action initiated by the social partners could lead potential clients to choose competitors, seriously affecting Fincantieri from both an economic and marketing point of view. For this reason, the parties laid down a provision to settle disputes out-of-court, and to turn to litigation only as a measure of last resort. A detailed procedure was laid out to arrange regular meetings between the employer and the unions in an attempt to solve issues. Only then were .

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workers entitled to engage in industrial action, provided that early notice was sent to the employer. 3.1.2. The Agreement of 28 October 2000: Company Organisation, Outsourcing and the Consolidation of Variable Pay Outsourcing was another topic that was high on the agenda in discussions between the parties. The 2000 agreement reasserted the need for the company to rely on a business model where outside suppliers had a key role. Transferring noncore activities to other companies allowed for significant cost reductions, but the agreement also highlighted that it was fundamental to hire staff that was both highly qualified and highly respectful of relevant rules. This last point was an important one, to such an extent that the parties drew up a monitoring plan to verify full compliance with labour legislation, particularly rules on remuneration and occupational health and safety. As for variable pay, the 2000 agreement drew largely on the remuneration scheme previously in place. In other words, three types of variable pay were in use: the “productivity-based bonus”, the “programmebased bonus” and the “profit-based bonus”. As for the incentive linked to productivity, it was agreed that it was necessary to meet the productivity targets laid down in the supplementary collective agreement signed four years earlier to boost competitiveness in target markets. For this reason, as all production units failed to achieve the objectives set down, further action was needed to deal with possible issues hampering economic growth. As a first step, the 35-level productivity scale was retained, confirming the willingness to increase productivity by 40%. However, to help the company to increase performance, management decided to increase the amount of bonuses paid to staff reporting a productivity rate lying between Level 30 and Level 35 of the scale mentioned above. Furthermore, as many employees struggled to understand the workings of the variable pay scheme, the parties agreed to clarify the productivity targets that needed to be achieved. In relation to the “programme-based bonus” implemented on an experimental basis, the parties regarded it as tool to boost productivity and thus decided to use it permanently. It bears repeating that this scheme was linked to particularly relevant targets and became essential to consolidate Fincantieri’s reputation at national and international levels. One aspect that emerged from the agreement was to make sure that this indicator represented employees’ contribution to business success, therefore bonus increases were also planned.

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Finally, the “profit-based bonus” was also confirmed and was seen as a tool to measure business development, which was arrived at by considering factors like production output and the average paid workforce in the reference year. The introduction of a profit-based bonus was also linked to the international market, as most companies had implemented this form of variable pay. Overall, it can be observed that the 2000 agreement was an attempt to further consolidate the provisions already in force, by making minor amendments to “productivity-based bonuses” and “programme-based bonuses”. This new remuneration arrangement seemed to be fully in line with the needs voiced by management in terms of economic growth and those expressed by unions as regards the acknowledgment of workers’ performance.

3.2. Attempts to Privatise Fincantieri and Amendments to the Productivity-based Bonus: The Agreement of 15 June 2004 3.2.1. Fincantieri’s Unsuccessful Privatisation and its Growing Competitiveness in International Markets leading to a New Companylevel Collective Agreement Unlike other IRI members, Fincantieri was not involved in the privatisation programme that began in the 1990s, but it joined Fintecna, a subsidiary of the then Ministry of Treasury. At the time, Fincantieri had high-quality production and excellent organisation that made it one of the most competitive companies in the shipbuilding industry worldwide. As repeatedly pointed out, the decision to invest in specialised and high added-value markets, therefore prioritising quality over reduced costs, helped Fincantieri to become a key player at an international level and to significantly increase its number of orders. Evidently, this also had an impact on finances, which reported a positive trend especially if compared to previous years. While at the start of the 1900s prospects seemed bleak for the company, now experts in the field and government representatives held Fincantieri in high regard, as it came to play a leading role in the cruise industry. Management ought to be credited with the ability to cope with a longstanding economic crisis and their role in improving the company’s reputation. By successfully modelling the business structure on everchanging demand and production, the company managed to deal with a fluctuating market. As for collective bargaining, following the reorganisation processes of the 1990s and the collective agreements concluded to ensure their

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continuity in the 2000s, Fincantieri and trade unions worked in harness to keep its already high standards of efficiency and increase product quality. It was against this background that a new company-level collective agreement was concluded on 15 June 2004, with the aim of consolidating Fincantieri’s leading position in target markets. The agreement laid down a number of possible business projects that had to be examined along with the content of the “Document on industrial policy, production, competitiveness, and investments” that was appended to the text of the agreement. The latter provided an introduction discussing the economic situation of the international shipbuilding industry and pointing out how Fincantieri was among the few companies that bucked the negative trends by reporting a profit. This was followed by some guidelines to be implemented to keep competitors at bay. With special reference to the cruise industry, the parties shared the importance to focus on technologyintensive, diversified production to increase the client portfolio. As for the department specialised in military shipbuilding, the main goal was to consolidate business relations with the Italian Navy and to promote collaboration with other countries. Equally relevant was the move to step up collaboration between Fincantieri’s different departments and shipyards, attempting to bring together planning and production activities as much as possible. A further aspect was reliance on an integrated organisational model where internal staff played a key role – while also counting on outside suppliers for noncore activities – therefore helping Fincantieri to fulfil requirements like functionality, quality and innovation, which are necessary steps to increase the number of orders. Finally, as far as investment was concerned, management reasserted its commitment to appropriating funds for manufacturing prototypes and developing technology to upgrade production – especially in relation to hull design and outfitting – either for merchant or military vessels. As for military shipbuilding, it was agreed to significantly invest in innovation to seek new clients the world over. 3.2.2. The New Productivity-based Bonus laid down in the Agreement of 12 June 2004 By means of the Agreement of 12 June 2002, Fincantieri made changes to productivity-based pay. The profit-based bonus in force until then was set aside – with analysts claiming it could not be further updated – and replaced with a new remuneration item, (results-based pay). As for remuneration depending on

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one’s productivity, it was divided into two main components: one already existing, which depended on the productivity level (Area-related Productivity Bonus) and the other that was granted according to workers’ production unit (Unit-related Productivity Bonus). Area-related Productivity Bonus This bonus was already in force and was arrived at by calculating performance in each workshop. The productivity scale in place was reviewed to raise the bar relative to productivity targets. In particular, the terms laid down in the 2000 agreement were amended as far as the relationship between percentages of productivity growth and relative pay was concerned. As illustrated in Figure 4, Level 28 became the starting level of productivity growth required in each site. As management believed that this objective had been fully met by all manufacturing facilities, a review remuneration linked to the lower levels of productivity (i.e. from Level 27 downwards) was seen as a necessary step. Consequently, this area of the productivity scale was streamlined, so that the difference between each remuneration item amounted to just one percentage point, therefore facilitating bonus allocation. Unit-based Productivity Bonus The unit-based productivity bonus was paid along similar lines to the area-based one. The aim was to assess the relationship between the hours assigned to perform work and those actually utilised, yet considering an entire working unit rather than single manufacturing areas or facilities. The increase in productivity corresponded to one of the 5 levels on the productivity scale, according to which remuneration was paid. The assumption was that seeking integration within each unit was a prerequisite of the new rewarding system to fulfil the productivity targets set down in each shipyard. They believed that rewarding the overall increase in productivity reported by the entire working unit would serve as a catalyst for those facilities that were still below the 40% productivityincrease threshold. The new bonus was structured so as to allocate the bonus only to those working units reporting an average increase in productivity, somehow encouraging the least performing sites to increase their productivity levels.

Supplementary Collective Bargaining in the Shipbuilding Industry Figure no. 4 – Productivity Scale according to 12 June 2004

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Programme-based Bonus The new collective agreement retained the programme-based bonus put in place during 1996 and the 2000 agreements, making it dependent on the fulfilment of specific objectives set down in each working unit (e.g. ship delivery, launch etc.). Targets were set every year via a collective agreement concluded by company management and union representatives from different working units.

CHAPTER THREE SUPPLEMENTARY COLLECTIVE BARGAINING AT FINCANTIERI: FROM THE 2008 ECONOMIC RECESSION TO 2016 NEGOTIATIONS TO CONCLUDE A NEW COMPANY-LEVEL COLLECTIVE AGREEMENT

1. Supplementary Collective Bargaining as a Major Tool to Deal with the Economic Recession: The Company-level Collective Agreement of 1 April 2009 1.1. The Shipbuilding Industry’s Economic and Production Growth in the 2000s 1.1.1. The Development of Shipbuilding: Increasing Competitiveness and the “LeaderSHIP 2015” Project European shipbuilding reported a significant increase in both financial and productive terms in the 2000s. While a fall in the number of orders was reported in many activities related to shipbuilding in the 1990s, starting from 2003 commissions hiked, with this trend that lasted for a number of years. Benefitting from a favourable economic context, shipyards were literally overwhelmed by ship-owners’ requests to build new ships, up to a point that demand almost exceeded productive capacity worldwide. Generally speaking, the number of work orders doubled between 2003 and 2004, reaching 40 million compensated gross tonnes. Needless to say, this state of affairs was the result of a particularly flourishing European market. As already discussed in the previous chapters, shipyards based in Europe could no longer count on financial aid from EC institutions that helped them stay afloat in the past, nor on financial support from national governments. Consequently, the increase in demand was a timely one and

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allowed shipyards across Europe to see through internal restructuring while limiting social consequences. Starting from 2004, the shipbuilding sector’s economic growth increased steadily until 2007. Among other things, the increase in economic activity was also favoured by exceptional demand levels, exceeding productive capacity of companies operating in the Far-East, which still played a leading role in the sector (see Figure 5). Accordingly, production gradually moved towards Europe, where shipyards could still meet demand. As shipyards in the Far-East were unable to deal with further work orders, ship owners decided to have their ship built in Europe, particularly in Italy. Figure 5: Order Portfolio in the Shipbuilding’s Industry

NB. R.D.M. = Rest of the World; CESA = Community of European Shipyards’ Association (The European Union plus Norway, Croatia and Romania); Giappone = Japan; Corea = Korea; Cina = China. Source: ASSONAVE, I grafici a corredo della Relazione Annuale Assonave 2006, Annex 13.

Notwithstanding the foregoing statistics, there existed a widespread perception that action was needed to further reduce the economic and productive gap with the world’s leading shipbuilders. To this end, the European Union and national governments devised the “LeaderSHIP 2015” project, aimed at increasing shipbuilding competitiveness through

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the pursuit of excellence. Through this project, the European Commission wanted the shipbuilding industry to initiate an ambitious programme to ensure its long-term prosperity in a dynamic growth market. The programme drew upon the Conclusions of the Council of 14 March 2001, where the sector was encouraged to improve competitiveness. The project set its sights to increase European shipbuilding, by maintaining and further developing a strong position in selected higher-value market segments; ensuring world leadership in product and process innovation; developing a strong customer orientation; further improving the networked industry structure; optimising production processes and increasingly focusing on knowledge-based products. All of this was made possible by putting in place a number of initiatives, the most important of which was stepping up investments in innovation. Sided by a number of Member States, the European Union reasserted that seeking new solutions and objectives to revitalise European shipbuilding was of the utmost importance. This goal resulted from the awareness that the increase could be temporary, so improving competitiveness was dependant on seeking quality and excellence in production. As it was not possible to compete with Far-East countries on price, manufacturing highly-technological, tailor-made products featuring accuracy and attention to detail was seen as a way to entice ship-owners to prefer European shipyards over eastern ones. There was another aspect that boded well for the project’s success, namely the cooperative approach put in place by different actors in European shipbuilding. On this score, the guidelines making up LeaderSHIP 2015 were drafted thanks to the participation of all those concerned (employers, trade unions, governments and members of the European Commission and the European Parliament). This cooperation highlighted that there was full agreement on the programme put forward and that there was a need to focus on quality and innovation as founding principles of each business. This point was also reasserted by the European Economic and Social Committee (EESC), as they argued that this document “seeks to define a strategy for the development and strengthening of European competitiveness, as well as for making full use of the EU's technological advantage in the shipbuilding sector by promoting innovation and research”. Therefore, Europe’s shipbuilding sector dealt with this period by rising demand proactively and by seeking budgetary consolidation through policies more oriented towards product quality.

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1.1.2. The Implementation of the Super-cycle in Italy’s Shipbuilding Sector As already discussed in the concluding chapters of Part II, the 2000s marked a fresh start for Fincantieri. The company’s new organisational structure and production would enhance cost reduction and competitiveness in target markets. The many initiatives aimed at stepping up productivity in all production sites and investments in research and innovation made it possible for the company to fulfil its objectives as regards rationalisation and internationalisation, boosting competitiveness worldwide. Further, the move to focus on high added-value, high-quality products enabled Fincantieri to stand out in some sectors (e.g. the cruise industry) while keeping eastern competitors at bay. This strategy – and favourable market conditions – caused orders to skyrocket, benefitting, if temporarily, all production facilities. For the moment, the long-standing issue of overcapacity was pushed into the background by exceptional demand, which was dealt with by distributing orders evenly among all the company’s shipyards. As seen, Fincantieri’s new core business turned to cruise shipbuilding, an area where the company easily defeated competitors also thanks to innovation-rich planning and new business practices. In terms of orders, the cruise industry had its heyday between 2004 and 2007; demand quadrupled between 2003 and 2004, and production rose from 432,000 to 1.667,000 compensated gross tonnes, making Fincantieri the leading shipbuilding company in both Europe and elsewhere (see Figure 6). Far-East competitors also fared well in this area – especially in terms of profits – but could not outclass Fincantieri’s established knowhow, which was an added value in the eyes of international ship-owners. High manufacturing quality and well-established relations with investors helped Fincantieri to secure a significant number of orders, and to offset the major shortcomings that affected the company, particularly in terms of supply, which exceeded demand. The amount of orders processed ensured the company a breath of fresh air and the use of all plants at their full capacity for many years ahead.

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Figure 6: Marrket share in thee cruise industrry in Europe

N.B. CARIC CO DI LAV VORO- NAVI DA CROCIIERA = WORKLOAD RELATED T TO THE CRU UISE INDUSTR RY; ITALIA = ITALY; FIN NLANDIA (FINLAND); GERMANIA (GERMANY) ( Source: ASSO ONAVE, Graficci a corredo deella Relazione A Annuale Asson nave 2004, Annex 15.

Table 3: Fin ncantieri’s Turnaround fo or New Ordeers New Orderrs (Euro/millioon) Department of Cruise Shiipbuilding Department of Commerciial Shipbuildingg Department of Military Shhipbuilding Department of Ship Repaair TOTAL

2003 98

2004 4 2.343 3

407

530

71 -4 572

198 -2 9 3.069

Source: FINC CANTIERI, Relaazioni e Bilanciio 2004, pag. 188.

Along ssimilar lines to the cruisee industry, Fiincantieri maanaged to increase production alsoo in military y shipbuildinng. Attention towards clients’ neeeds – particullarly foreign navies – enaabled the com mpany to increase ordders, with thiis trend that persisted p untiil the mid-20 000s. The decision to open up to the internattional markett proved to be right; partnershipss with the Geerman, French h, Indian, Maaltese, and U.S. U Navy were particuularly profitabble in terms off production.

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Moreover, Fincantieri took care to increase its presence in certain market segments in order to widen its production scope. Its manufacturing plants scattered throughout Italy enabled the company to engage in noncore activities besides cruise shipbuilding, among others ship conversion and super yacht building operations. As for ship conversion, resources were allocated to the production facility of Palermo, particularly because it occupied a strategic position at the centre of the Mediterranean Sea. Management believed that this shipyard had to establish itself in the cruise industry, especially in after-sale services and ship conversion. As for super yachts, Fincantieri aimed at diversifying its production even further, accessing a market niche that would benefit the company’s finances and reputation.

1.2. The Serious Economic Recession affecting the Shipbuilding Industry in 2008: Falling Demand and the Need for Restructuring 1.2.1 The End of the “Golden age” of Shipbuilding and the Search for Closer Cooperation at the EU Level The positive trend started in 2003 in the shipbuilding industry shown signs of abating in the first months of 2008. The financial slowdown that broke out worldwide as early as the latter half of 2007 reared its ugly head also in the real economy, impacting all productive sectors and somehow questioning the underlying principles of industrial development. The lack of support from leading international financial institutions, and the consequent disruption in terms of credit provision, further contributed to widening the crisis in all industrial systems. The crisis was particularly felt in the shipbuilding industry. While the shipbuilding order book in 2007 stood at over 132 million compensated gross tonnes, now the number of orders had more than halved, suggesting that the future for the shipbuilding industry would be all but rosy. The sudden and unpredictable economic recession undoubtedly was a major contributing factor to the decline of the shipbuilding sector, which started in 2008. As discussed in the previous chapters, the 2000s saw demand soaring, benefitting leading companies operating internationally. The high number of orders and sound balance sheets seemed to ensure shipbuilding companies a bright future. Although sector analyses ruled out the possibility that high demand would persist, ship-builders set aside those restructuring plans devised in times of crisis, leaving their workforce intact and considerably increasing

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the number of orders processed. Consequently, while countries in the FarEast dominated the shipbuilding market worldwide, in Europe the considerable number of orders received induced shipyards to set aside cost-effective strategies aimed at boosting efficiency helping them to grow more competitive. Apart from the LeaderSHIP2015 project put in place some years before, in 2007 the European Union put in place another programme to promote integration in European shipbuilding. The aim of EU institutions was to increase technology use in production in order to attract more international clients. More specifically, the EU document titled “An Integrated Maritime Policy for the European Union” stressed that “The EU will work towards more efficient international governance of maritime affairs and effective enforcement of international maritime law, urging member states to ratify the relevant instruments. It will promote coordination of European interests in key international fora”. The measures referred to above added to other initiatives put in place by EU institutions to support the European shipbuilding industry, particularly those concerning the replacement of old vessels, for which resources were allocated to reduce emissions, thus protecting the environment and ensuring safety. The crisis raged through Europe with particular emphasis, despite attempts by the European Union to limit its impact. Sectors specialised in high added-value production were also affected by the economic slowdown, causing many European shipbuilding companies to review their business strategies. Restructuring and rationalisation plans came to the fore once again in discussions on manufacturing for the following years. This was also due to the fact that traditional high-demand sectors – e.g. cruise shipbuilding – was in trouble because of ship-owners’ cancellation of orders. Hit by the economic crisis, clients were more reluctant to put money into the sector, preferring quick-fix solutions (e.g. ship refit or repair) over costly investment plans. The grave economic recession left scars all across Europe. STX Europe – one of Fincantieri’s major competitors – was constrained to change its core business and to request social safety nets for many plants based in Europe, particularly those in France and Finland. The same happened in Germany, which was home to long-established shipbuilders. Many facilities were dismissed and massive restructuring programmes took place, posing serious challenges in terms of employment.

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1.2.2. The 2008 Severe Recession affecting Italy’s Shipbuilding Sector As it was with the rest of Europe, Italy was affected by the deep economic crisis that had started in 2008. Fincantieri was severely hit by the adverse market conditions, particularly by a fall in demand for cruise ships, a sector on which the company relied heavily and in which it was well-established. The decision to invest money and energy in this market segment made the consequences of the abrupt fall in orders even more serious, particularly in financial terms. In the words of the then President of Fincantieri, Corrado Antonini, the company “is well aware that the current financial and economic crisis is the worst ever experienced by the shipbuilding sector in the last thirty years”. Adding to this was the financial issues faced by the company as regards exports, causing longstanding clients to gradually walk away. This state of affairs, and falling demand for military and passenger shipbuilding – including offshore vessels – significantly reduced the number of orders. By way of comparison, in 2007 Fincantieri’s order book showed a figure of 4,238 (in Euro/million) while in 2009 it dropped to 1,700 (in Euro/million). Further, worldwide demand for new ships between 2007 and 2009 faced an 83% decrease. As we have seen, the financial crisis did not even spare the cruise industry. Ship-owners were reluctant to place new orders, mainly because the struggle faced by this sector from 2008 onwards. In 2007 – that is when demand for cruise ships peaked – Fincantieri received 16 new orders, as compared to 3 in 2008 and just 1 in 2009. Military shipbuilding suffered the same fate, as a result of the international crisis. Demand fell drastically, and ship-owners had to close ranks to deal with this situation. Fincantieri pressed ahead with its internationalisation process, setting up new partnerships with navies in other countries (e.g. United Arab Emirates). The company also took over the U.S.-based Manitowoc Marine Group, which was seen as a strategic move to enter the U.S. market and widen its client base in military shipbuilding. Though to a small extent, the international economic crisis also hit the offshore industry, compelling larger clients to review their investment and development plans. Furthermore, eastern competitors dominated the offshore industry because of their know-how and because they offered products well below market price compared to their European counterparts, therefore receiving large numbers of orders. Ship repair and conversion were the only activities that fared well against a backdrop of crisis. Following the formidable increase in the number of ships built between the end of the 1990s and the start of the 2000s, those plants specialised in ship maintenance (Fincantieri’s was in Palermo) received a sufficient amount of orders enabling them to run at

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full capacity. After the prosperous period enabling Fincantieri to fulfil the orders acquired, those restructuring and rationalisation plans characterising the 1980s and the 1990s came to the fore again. As seen, Fincantieri shelved those plans during the “super-cycle” era, for the significant number of orders and increased demand contributed to providing stability to eight production facilities scattered across Italy and to over 10,000 staff. However, Fincantieri’s long-standing problems were pushed back into prominence by the dwindling number of orders, compelling management to look for solution ensuring the company a stable future. In addition, the economic crisis led Fincantieri to accept orders at unfavourable economic conditions in both 2008 and 2009. The negative consequences of this decision were particularly evident at the time of issuing the provisional budget for 2009 and above all that for 2010, when it became clear that there were no prospects for future growth. As has frequently happened in Fincantieri’s history, management and trade unions worked side by side to cope with the economic and financial recession, laying down cost-effective measures to increase efficiency and productivity. In parallel, they also voiced the need for internationalisation and product diversification to increase the company’s competitiveness in target markets.

1.3. Collective Bargaining as a Catalyst for Seeing to the Serious Recession Hitting International Markets: The Supplementary Collective Agreement of 1 April 2009 1.3.1 Measures concerning the Production System As pointed out in the previous chapters – and in light of the particularly unfavourable conditions of target markets – Fincantieri and trade unions concluded a supplementary collective agreement on 1 April 2009 aimed at seeking the most appropriate solutions to attend to the crisis. The parties agreed on the necessary measures to further consolidate Fincantieri’s production, laying down initiatives intended to boost flexibility, efficiency, international competitiveness to maintain all production facilities scattered throughout Italy. The project was shared by trade unions and involved key processes such as engineering and manufacturing. As for the first aspect, the parties called for the need to increase staff skills – among others those in charge of processing orders or with expertise in particular areas – as a mechanism to increase flexibility and reduce costs. This measure was seen as a condition to train a multiskilled workforce and to allow Fincantieri to work on different ship orders

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simultaneously. As for cost reduction, some relevant steps were taken on the supply side, with the base of external suppliers that was significantly widened to obtain the best prices on raw materials. Furthermore, a new “integrated and centralised system for supply chain management” was adopted to handle relations with larger suppliers and keep management costs under control in each production site. Production was also marked by a number of changes, and efforts were concentrated on the following goals: empowerment of employees working on production lines; improvement of operational resources; implementation of improvement programmes directly involving internal resources without resorting to external consultants. As for outsourcing, it was agreed to contract out noncore tasks that would be costly to carry out internally, with Fincantieri that reasserted its commitment to monitor external contractors’ compliance with relevant legislation. Conversely, internal staff was employed on core, high addedvalue activities, including among others hull construction, ship outfitting and highly specialised planning activities. The strategies just illustrated were urgent ones to help Fincantieri to compete in target markets. In this sense, “flexibility” and “strategic management of production” became key watchwords to deal with an unprecedented recession and to promote efficiency and productivity, while maintaining high-quality standards. Management believed that quality had to represent the company’s distinctive trait since it was not possible to compete with the low costs applied by international competitors, particularly those from the Far East. Quality and operational flexibility were thus decisive aspects to entice ship-owners and increase the number of orders. 1.3.2 Investment, the Search for Higher Performances and New Technologies Besides measures related to the production system, Fincantieri also took several steps to increase efficiency and productivity. Faced with growing international competition, management decided to invest heavily in technological innovation and to create prototypes to make products more appealing on the market. To this end, internal planning was important as it enables one to learn new skills and to use the knowledge gained to work on new orders. In order to stand out in international markets, the parties also had to work together to improve individual performance, for instance by drafting training plans aimed at instilling a “performance culture” and at helping

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workers increase their skills base so they could work autonomously on different tasks. As for investments, Fincantieri aimed at consolidating its production and at improving infrastructure by careful resource allocation. Considering the investments already made and those scheduled for 2009, Fincantieri allocated a total of €180 million. The goal was to increase efficiency while ensuring high levels of occupational health and safety. These resources were used to complete renovation works started two years before in the production sites under the control of the Department of Merchant Shipbuilding. As for facilities specialised in military shipbuilding and ship repair and conversion (e.g. that based in Palermo) the focus was on upgrading existing plant and strengthening infrastructure used to build and launch new ships. Finally, in relation to shipyards building super yachts, Fincantieri management undertook to build up the infrastructure related to production, plant and the provision of service necessary to deliver the orders assigned. 1.3.3. Results-based Pay The agreement concluded by Fincantieri and trade unions on performance-based pay was heavily affected by the economic crisis. The fall in demand compelled management to seek solutions to increase efficiency and productivity, adjusting products to compete with international competitors. Consequently, staff was asked to step up to the mark and to fare better in terms of presence, time, and quality of performance. As already discussed, quality was given high priority to compete with low-cost production from the Far East, for example by delivering ships ahead of time. The agreement specified that it was necessary to increase production efficiency by 20% and to strike a better balance between the hours assigned to fulfil a task and those actually worked. In other words, the parties agreed on the necessity to review strategies to achieve the desired results in target markets, for instance by making the variable item of remuneration dependent on the fulfilment of certain objectives. Consequently, it was decided to divide results-based pay into two items, one linked to efficiency (premio di efficienza) and another one associated with particular circumstances where an increase in production was expected (premio di programma). As for the former, the agreement set forth that each workshop was assigned a yearly production target and the hours needed to fulfil in each semester. A twenty-level scale – where level 20 represented the highest level of efficiency – was used to calculate the

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increase in efficiency produced and the bonus due. Unlike in the past, efficiency was no longer assessed taking into account a working area but considering workshops, which were regarded as complex organisational entities. This system was used because it was thought to ensure a more detailed evaluation of the increases in efficiency. This new variable pay scheme replaced the one related to production areas and units laid down in the Agreement concluded between Fincantieri and trade unions on 15 June 2004. As for the piano di programma, this bonus was linked to special circumstances resulting in production increases taking place over the year. Specifically, the supplementary collective agreement established that the parties had to convene to determine at most four production targets that had to be fulfilled in a given period, setting down the bonuses assigned for each of them. The special circumstances referred to above were divided into “significant moments” – for instance ship launch and delivery – and “productive events” – e.g. works and specific products bearing particular relevance. The premio di programma was different from the other one in terms of evaluation criteria – which considered the entire production unit – and timing of payment, as it was paid every three months. With a view of increasing the company’s levels of competitiveness and recognising the work done by certain professional categories, a third results-based pay scheme was introduced specifically addressing workers with supervisory functions – e.g. workshop managers and vice managers, and production supervisors – as a rewarding system promoting individual management and planning objectives. This bonus consisted of three main components (an “efficacy-related objective”, an “efficiency-related objective” and an “economic/qualitative-related objective”) that borne different relevance as regards money allocation. For instance, the “efficacyrelated objective” was associated with compliance with deadlines and was worth 25% of the total bonus; the “efficiency-related objective” amounted to 40% of the entire bonus and was assigned considering the ration between the hours given and those utilised to carry out a certain task; finally, the “economic-qualitative-related objective” made up 35% of results-based pay and depended on economic and qualitative factors. Evaluation took place by means of a specific form and considered the contribution in terms of management on the part of the workers concerned. Recipients of this bonus could not be granted the one based on efficiency referred to above.

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1.3.4. Management and Operational Flexibility Another important aspect that was dealt with in the agreement concluded on 1 April 2009 concerned management of periods of extremely low demand in production units. Specifically, flexibility arrangements and ad hoc measures addressing the lack of orders were devised that supplemented traditional income support measures granted to workers in times of crisis. They were intended to limit as much as possible the negative social consequences resulting from entering periods of low demand. Fincantieri committed itself to providing training schemes for workers who experience periods of inactivity. 1.3.5 The Agreement of 1 April 2009 and Health and Safety at Work Occupational health and safety was a main theme in the 2009 supplementary collective agreement, in which parties reasserted the need to increase health and safety at work. To this end, workers’ health and safety representatives were assigned a central role in promoting prevention measures, while Fincantieri stressed the importance of the agreement signed with INAIL and ISPEL to establish a system of occupational health at safety that particularly applied to external contractors and prevented risks resulting from contractors operating simultaneously in the workplace. Arguably, the intention of management was to closely monitor the tasks performed by internal staff and external contractors, therefore keeping work-related risks to a minimum. As for health and safety representatives, specific criteria were set down to appoint them which were included in an attachment accompanying the text of the agreement. A meeting had to be convened between trade unions and the other health and safety representatives operating at the company during which designation, which lasted three years, had to take place. The name of those designated as new health and safety representatives had to be then communicated to management and published in a special register. They were in charge of monitoring the production cycle and worked with those appointed to devise prevention measures (Responsabili di servizio di Prevenzione e Protezione di Fincantieri) to prevent an overlapping between internal staff and external companies working at Fincantieri’s premises. Further, workers’ health and safety representatives had to meet to discuss possible issues and cooperate with relevant authorities in the event of inspections and checks. They were also required to take part in training to comply with the requirements laid down by law to perform their tasks, as specified in the Interconfederal Agreement of 22

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June 1995. One of the aims of the parties was to favour cooperation between the company and health and safety representatives, for instance by raising awareness of the importance of complying with rules for the prevention of accidents to ensure workers’ safety. 1.3.6 Cooperation between the parties: The Collective Agreement of 16 July 2009 The supplementary collective agreement of 1 April 2009 was a watershed moment in relations between Fincantieri and trade unions. Nevertheless, following a period characterised by a positive trend in demand, the company had once again to deal with an economic downturn. Unlike previous recessions, this one came unexpectedly, and management had no alternative but to reduce working hours and make use of income support measures to avoid a financial crisis. With little prospect of increasing the number of orders in the following years, some trade unions (FIM and UILM) agreed on the drastic measures put forward by Fincantieri management, while FIOM opposed the terms of the April agreement, fearful that this could lead to the dismissal of some production sites because of low demand. Particularly, FIOM’s demands included safeguards as regards remuneration, the commitment of management to not make anyone redundant, the setting up of an investment plan to renew infrastructure, and a limitation on the use of outsourcing. On this last point, FIOM requested the application of the agreements signed in 1999 and 2004, which put a cap on the amount of work that could be assigned to external contractors, therefore disapproving of the company’s projects to contract out some specific activities (e.g. hull building). Therefore, a first supplementary collective agreement was concluded on 1 April 2009 with FIM and UILM, which was followed by a further agreement on 16 July 2009 that was welcomed by all the unions. The objectives the parties intended to achieve with these agreements were specified in the preamble of the April one, which read as follows: “In relation to the supplementary collective agreement of 1 April 2009, the parties have clarified some issues concerning its application to favour cooperation between management and trade unions in each production facility, particularly as regards outsourcing and health and safety at work”. In both the arrangements, it was specified that operational flexibility will be the key to increase the number of orders, therefore saving many jobs and preventing closures. To this end, outsourcing was limited to

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assignments that were particularly costly or for which highly-qualified labour was needed.

2. The Economic Crisis and Production Issues: The Reorganisation Plan of 2011 2.1. From 2010 to 2012: The Crisis lingers on in the Shipbuilding Sector 2.1.1 The Struggle faced by the Shipbuilding Sector Worldwide The dramatic effects of the economic crisis that broke out in 2008 were still visible in the years from 2010 through 2012, mostly on account of low demand. As seen in the previous chapters, production reached its lowest point in 2009, and then some gradual signs of improvement were reported. For instance, in 2010 the shipbuilding sector reported orders for a total of 39 million compensated gross tonnes, against the 16 million totalled in 2009. While a positive trend, a major gap existed between demand and productive capacity, especially if one considers that the latter amounted to 60 million compensated gross tonnes. Significantly, Far-East competitors dominated the shipbuilding market at the time, and European shipyards were only able to carve out a space for themselves by offering high addedvalue and quality products. The financial crisis was also felt in the cruise industry which, while a rapidly growing market, was affected by the difficulty faced by shipowners, who on many occasions were compelled to withdraw their orders. The same could be said for the ferry and the military sector, which recorded a significant increase in demand, so the little funding available was used to preserve existing ships rather than buying new ones. 2.1.2 Fincantieri’s Production Difficulties Fincantieri still suffered greatly from the after-effects of the 2008 economic crisis. Notwithstanding the supplementary collective agreement concluded in 2009, management had to deal with serious problems regarding company development and production. One of the major difficulties was that of evenly distributing assignments concerning the reduced number of orders among the 8,000 workers employed in different facilities. Low demand called for a leaner organisation that could adapt to market trends. However, the terms imposed by the union in terms of

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employment stability compelled management to jump through hoops to avoid closure. Cruise building was still the company’s core business, and the number of orders – although limited compared to previous years – kept the production sites managed by the Department of Merchant Navy going until 2013. Further, the allocation of funding by national and community institutions to replace old fleets and investments granted to set up environmentally friendly prototypes also gave new impetus to the company. As for military shipbuilding, it has been stressed that a 55% decrease in the demand for warships was reported between 2009 and 2019. An exception was represented by the U.S. government, that constantly needed new ships to renovate its fleet. For this reason, entering the U.S. market was a winning move for company development.

2.2. The Reorganisation Plan of 21 December 2011 2.1.1. Some Guidelines to Lift Fincantieri out of a Long-standing Crisis After leaving no stone unturned to increase production efficiency and quality and to become more appealing in target markets, management at Fincantieri was compelled to put in place a massive restructuring scheme and make use of temporary unemployment benefits. The aim of the plan was to increase the number of orders received and to revitalise the brand in target markets. To this end, an increase was reported in the use of income support measures granted to workers whose working time was reduced for lack of work. This aspect was also clarified in the premises to the reorganisation plan concluded on 21 December 2011: “the imbalance between demand and supply, which was caused by the economic crisis and was augmented by large investments in new facilities from eastern competitors, has produced overcapacity worldwide which is now a permanent rather than a temporary factor”. The long-standing nature of the economic crisis calls for a reduction of supply to adjust to lower demand. Consequently, the application for extraordinary wage guarantee funds was accompanied by a plan to seek solutions to the crisis. Strategies to overcome the crisis included: the overhaul of the company’s organisational and productive system to adapt it to new market needs; actions to consolidate and revamp core businesses; access to market niches to widen the company’s products base; an investment plan to increase the use of technology in shipyards; training to help staff develop their knowhow.

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2.2.2 The 2011 Restructuring Plan and the New Company Structure A new structure was given to Fincantieri, which however did not affect existing production facility. The aim was to increase the cooperation between them to create veritable “aggregated production centres” to satisfy ship-owners’ needs of quality. In this sense, the objectives were to organise business activities into specialised hubs, to use facilities affected by shortcomings in terms of infrastructure for other industrial purposes and to adjust staff’s functions and tasks to the new organisational model. The three aspects above represented the starting point to pursue more flexible and dynamic internal organisation. For instance, collaboration between production facilities was sought by creating an “integrated production centre” concerning military shipbuilding and by favouring interaction between sites located along the Adriatic coast. On this last point, it was established that planning and production activities related to cruise shipbuilding and involving the shipyards in Monfalcone, Marghera and Ancona had to be shared to boost efficiency. As far as military shipbuilding was concerned, the plan was to create a fully-fledged “integrated shipyard” bringing together the activities carried out in the plants of Riva Trigoso and Muggiano. This new entity was controlled by the Department of Military Shipbuilding and had to specialise in the construction of warships and mega yachts. Such a new entity kept the two production sites separate, and differentiated production in order not to waste the wealth of knowledge gained. So, the shipyard in Riva Trigoso dealt with medium and large-sized ships and developed expertise in mechanics, while the one based in Muggiano specialised in after-sales services and in the production of small-sized vessels, mega yachts and submarines. Management at Fincantieri also reasserted its commitment not to shut down those facilities with infrastructure shortcomings, e.g. that of Palermo –which played an important role in ship repair and construction – and those based in Castellammare di Stabia and Sestri, which however underwent some renovation works to adapt to changed market conditions. 2.2.3. Strategies related to Core businesses Along with actions to strengthen internal organisation, Fincantieri also thought it was fundamental to intensify existing commercial links and put forward strategies to increase competitiveness. As for the cruise industry, relations were tightened with long-standing clients and new ones were targeted so as to offer them “technology-intensive products at reduced

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costs”. The need to make massive use of technology also regarded the production of cruise ferries, particularly to safeguard the environment and reduce energy consumption. As for military shipbuilding, trade relations with the Italian and the U.S. Navy were intensified, with Fincantieri that became a leading player in target markets. As for mega yachts, which was a market niche, the search for potential clients was extremely difficult, particularly in emerging markets (among others China, India and Brazil). Finally, as for ship repairs and conversion, the main aim was to strengthen relations with clients. 2.2.4 The 2011 Reorganisation Plan: Business Development and a Greater Focus on Research and Innovation With a view of increasing demand, Fincantieri decided to pursue new market segments besides consolidating those where the company already had a strong presence. Diversifying production was seen as a tool to better cope with little demand and head off serious consequences in terms of employment and revenue. For instance, the company was particularly interested in the offshore industry, particularly in relation to the construction of machinery concerning oil-extracting activities. In parallel, Fincantieri also engaged in new projects with research centres to widen the production scope. The “Plasmare” project (literally: “to model”) that concerned floating platforms was an example of how innovation could contribute to reducing costs, especially because it helped to dispose of solid waste in portal areas of cities experiencing problems with their waste management cycle. Equally interesting was the project related to the floating prisons to deal with the problem of overpopulated penitentiaries. A further aim of Fincantieri was that of stepping up technology use and investing in research and innovation to compete in target markets. This was done by concluding agreements with leading research centres at both national and international levels, e.g. Seastema, Delfi and Cetena, and the research hubs based in Friuli Venezia Giulia, Campania, Liguria, Sicily and Marche.

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3. Market Recovery and The search for New Forms of Operational Flexibility: Negotiations to conclude a New Supplementary Collective Agreement at Fincantieri 3.1 First Signs of Recovery in Worldwide Shipbuilding 3.1.1. The International Context, Easter Countries’ Increasing Competition, and New EC Policies: “The LeadersSHIP 2020” Plan After facing some difficult years, the start of 2013 seemed to breathe new life into the shipbuilding sector. Following a trend that had marked the last twenty years, countries in the Far-East continued to dominate the shipbuilding market. In figures, this means that China, Korea and Japan won 86% of new orders, against 14% of those pursued by European countries. The shipbuilding sector seemed to be back on track again as an increase in the number of orders was reported, more generally. The positive trend in demand was particularly felt in Italy. As the impact of the crisis softened, ship-owners were more willing to invest in their fleets. While significant, the increase in demand experienced in these years was nowhere near the golden age that characterised the sector between 2003 and 2007. The international financial context is more favourable than previous years, yet clients were still reluctant to entrust shipyards with large projects, particularly because they had to recover from the previous great recession. Examining each market segment of the shipbuilding sector, one might note that the cruise industry experienced an increase in demand – mostly due to the company’s stronger presence in Far-east countries – while the ferry sector faced some difficulties, especially because of ship-owners’ lack of financial resources. A major change took place in the type of orders in the field of ship repair and conversion, for shipbuilders only wanted to pay for those tasks which were seen as extremely necessary. Finally, military shipbuilding mostly concerned the Italian market. Against this background, a need arose to put forward measures to increase EU shipyards’ presence on international markets. To do so, the European Commission launched the “Leadearship 2020 project” to support sustainable growth, high-value jobs and address the societal challenges Europe was facing at the time. The project built upon four main pillars for actions: “employment and skills”, “improving market access and fair market conditions”, “access to finances”, “research, development and innovation”.

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As for the first point, the European Commission stressed the relevance of training and increasing the skills of new workers who can meet the needs of European shipbuilders. Measures had also to be taken to safeguard “intellectual property rights” and to monitor the performance of “public works”. In relation to funding, the European Commission highlighted that easing access to funds could help companies to secure public contracts for shipbuilding. On this score, the European Commission underlined the importance of the European Investment Bank (EIB) and undertook to make provisions for new funding. Particularly, “long-term ship financing should be explored by the European Commission, the Member States, financial operators and the maritime technology industry”. 3.1.2 Società Fincantieri’s Economic Recovery and the Move to List on the Stock Exchange Starting from 2013, and particularly during 2014, Fincantieri reported a slow but steady increase in the number of orders, therefore experiencing an upward trend following the 2008 crisis. The rise in orders particularly concerned the cruise sector, where 14 new passenger ships were commissioned in 2014 alone (8 of which were assigned to Fincantieri, for a total of €5,7 million). Increased demand and well-established relations with leading shipowners resulted in renewed confidence and led management to resume the search for new markets and the idea to list in the Stock Market. After leaving behind the 2008 recession and its consequences, it seemed to be the right time to go public and to collect resources to reinvest in the company to increase the efficiency, the productivity and the quality of its output. In the words of Giuseppe Bono, the company’s CEO, having the company listed on the stock market was important in that it enabled Fincantieri “to react to competitors and to deal with the challenges arising from globalisation and other negative market conditions”. Consequently, Fincantieri was listed on the Milano Stock Market on 3 July 2014.

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3.2 Negotiations to enter into a New Company-level Collective Agreement at Fincantieri 3.2.1. Proposals put forward by Fincantieri to conclude a New Company-level Collective Agreement After the company-level collective agreement concluded between management and trade unions in 2009 – which was further extended without making any amendment – the economic crisis taking place between 2009 and 2012 brought negotiations between the parties to a standstill. It is interesting to note that the parties met on several occasions to discuss the renewal of the 2009 agreement, because the latter did not lay down any clause concerning its extension. Consequently, in 2013 it was agreed to renew the existing agreement and to postpone the conclusion of a new arrangement until market conditions improved. Indeed, it was in 2014 – i.e. the year the company was listed on the Milan Stock Exchange – that the parties started talks to define a new collective agreement. They first met on 22 December 2014 to discuss the terms that management regarded as necessary for the conclusion of the new collective agreement. The first aspect concerned operational flexibility, namely the opportunity to derogate from the collective agreement in relation to working time to deal with requests of faster production from ship-owners. Specifically, Fincantieri wanted more leeway to be able to increase individual performance, by also making use of extraordinary overtime and by distributing working time distributed unevenly depending on production. In order for the company to remain competitive, another proposal put forward was to ask staff to work during yearly paid leave (permessi annui retribuiti), without these hours being paid or serving for accruing leave. Fincantieri also pointed out that the performance-related pay system currently in place was also in need of a review. In this connection, it was proposed to consider two main remuneration items: one dependant on efficiency – as was already the case in the 2009 agreement – and the other based on work quality and the hours needed to complete orders. Management also wanted to introduce a rewarding system specific to staff performing supervisory functions – to be more focused on individual output – and to highly-qualified workers. In short, the aim was to streamline the system to allocate bonuses, making use of just one scheme that applied to all workers, including newly-hired employees. More dialogue with industrial relations actors was also sought to review employee benefits to adapt them to changed working and market

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conditions and to discuss with them new mechanisms to safeguard workers’ health and safety, by also making use of new technologies. Outsourcing was also high on the agenda in discussions between those concerned. The aim was to reduce the recourse to outsourcing while also experimenting new contractual arrangements (e.g. network contracts). As for the former, checks were tightened to make sure external contractors operating at Fincantieri’s facilities complied with relevant legislation. 3.2.2. Trade Union Demands After listening to the demands of management, it was the turn of trade unions to make their own requests, which can be summarised as follows: a) FIM- UILM The demands of FIM and UILM appeared to be in line with the terms laid down by Fincantieri. They agreed on the need to limit the use of outsourcing and to contract out work only whereas strictly necessary, thus strengthening internal productive capacity to ensure “the company’s unity and integrity in Italy”. In terms of industrial relations, union representatives asked for greater involvement and dialogue, pointing out the need to provide stable employment and thus reducing the use of fixedterm employment contracts. Occupational health and safety and the environment were also given priority and dealt with by stepping up monitoring activities and cooperation with health and safety officers. In the view of the unions, more detailed legislation concerning working time and flexibility was necessary regulating aspects such as the maximum hours one was allowed to work and bonuses in the event of overtime. Finally, in relation to performance-based pay, trade unions proposed that the existing system was used, increasing bonuses to be allocated when fulfilling objectives based on quality and efficiency. b) FIOM FIOM’s demands mostly concerned outsourcing, on which a major difference emerged from the stance of UILM and FIM. FIOM demanded that management directly monitored the whole production cycle and the works that were contracted out, arguing in favour of “a fund for workers performing outsourced work”. FIOM also requested a 20% increase in staff, the application of the same system of variable pay implemented in the last four years – when the 2009 agreement was in force – and an

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increase of the bonuses linked to efficiency and to specific objectives (premio di programma). 3.2.3 The Different Steps towards the conclusion of a New Companylevel Collective Agreement: The Establishment of Joint Bodies and the Repeal of the Previous Terms Talks to conclude a new collective agreement between Fincantieri and trade unions entered a crucial stage in 2014. In order to expedite negotiations, Fincantieri soon clarified that it was in favour of implementing the same conditions as the 2009 agreement. Several meetings were held in January and February to discuss the requests made by the parties and find some common ground. The gap between the parties soon appeared a wide one to fill. On the one hand, management emphasised the need to put in place a flexible organisation to meet new market needs. On the other hand, trade unions argued in favour of measures promoting manufacturing sites based in Italy, while also laying down measures to help the company establishing itself worldwide. The many difficulties to reach agreement led the parties to establish joint bodies consisting of experts in the field to attempt to solve this stalemate situation. Specifically, five delegations were set up, respectively dealing with: industrial policy; variable pay; flexibility, remuneration, leave, and industrial relations; employment, training, rewarding systems; health and safety and outsourcing. In the many meetings that followed, representatives of both trade unions and management did share their concerns and proposals, but failed to reach consensus. Consequently, in an unprecedented move, Fincantieri informed workers that the terms laid down in the 2009 collective agreement were no longer applicable. Undoubtedly, the decision made by Fincantieri on 31 March 2015 went down in history because they urged trade unions to share management strategies to boost effectiveness while taking account of workers’ needs. 3.2.4. Unprecedented Negotiations Fincantieri’s choice of nullifying the conditions laid down in the 2009 collective agreement was not welcomed by trade unions, which started protest and strikes in several production facilities to compel the company to backtrack on this decision. While there were no signs that the company could have second thoughts, the latter showed some willingness to discuss the terms of a new collective agreement, sharing the first draft of a document about “the Group’s organisation and industrial policy”. The

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intention was to move beyond stalemate and cooperate with the unions. FIM and IULM welcomed this move, while FIOM strongly opposed the contents of the documents. For this reason, a slowdown in negotiations was reported from July to December as no meetings were held between the parties.

4. The Supplementary Collective Agreement of 24 June 2016 4.1. New Results-based Pay: Old and New Mechanisms to Assess Employee Performance Negotiations to define the new company-level collective agreement were entered into at the end of 2014 and dragged on until 24 June 2016, when Fincantieri and trade unions concluded a new agreement lasting 3.5 years (from 1 July 2016 to 31 December 2019). The new arrangement provided for a major overhaul of results-based pay, with Fincantieri that reasserted its willingness to make remuneration more conditional upon employee productivity, product quality and timing. To this end, and to reach consensus, the new agreement introduces a new system of variable pay, which benefits the employer and gives workers a more straightforward tool to assess their performance. According to the new remuneration system, variable pay consists of two remuneration items: an “efficiency” bonus and a “participation” bonus. The former was also contained in the previous collective agreement concluded at the company level, though in the new version employee productivity is assessed for each working unit. Furthermore, the concepts of “punctuality” and “completeness” are also introduced as part of the efficiency bonus involving draftsmen. From now on, their efficiency will be also assessed considering the timing and completeness of the projects they submit. Yet the novelty of the company-level agreement currently in force lies in the introduction of the “participation” bonus, which is itself divided into two remuneration items. One refers to performance and product quality and entails the ongoing search for excellence in competitive markets. The other remuneration item making up the “participation” bonus is concerned with progress on each task assigned, involves all staff and is paid only when orders are delivered on time. The participation bonus is also dependant on the company’s profit. In other words, at the time of concluding the company-level collective agreement, the parties agreed that this bonus had to be paid only if a given EBIDTA (Earnings Before Interest Taxes Depreciation and Amortization) rate is achieved.

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4.2. New Forms of Occupational Welfare Increasing occupational welfare is one of the distinctive traits of the new company-level collective agreement. The parties agree to further consolidate the supplementary health insurance scheme already in place at Fincantieri and to grant workers an annual “social bonus”, to be used only to pay welfare-related services. By concluding a partnership with one of the leading companies in the provision of benefits, workers are given the opportunity to access a platform, to choose among a number of services and to indicate for which of them they want to spend the bonus they have been paid. In addition, the parties also agree that workers are free to allocate a part of this bonus to the platform mentioned above. Fincantieri’s emphasis on occupational welfare can be seen as the attempt to bring itself into line with international competitors, who show an increasing interest in the wellbeing of their staff also outside work, to step up workers’ feelings of belonging to the company. The focus on employee welfare represents an element of continuity with the past because previous collective agreements concluded in the metalworking sector (also at Fincantieri) already made provisions for flexible welfare schemes that met the needs of workers and their families.

4.3. The long-awaited Review of the Remuneration System and the Focus on Training and Outsourcing The new collective agreement concluded at the company level also deals with another aspect that has required attention in recent years: the review of the remuneration system. During negotiations, the objective to streamline remuneration policy met with the approval of both parties, because they realised that it was no longer possible to refer to arrangements dating back to the 1970s. Accordingly, the new collective agreement provides for a major overhaul of the remuneration schemes currently in place, which now feature a limited number of general items, though each worker is still granted elements of remuneration agreed upon in the previous collective agreement. The new pay system is also characterised by an “entry-level remuneration item” that applies to workers hired following the conclusion of the new collective agreement. Training and outsourcing are also major topics in talks concerning the collective agreement of 24 June 2016. Training is regarded as a key aspect to promote business development. To this end, priority is given to vocational and language courses, the latter being particularly important given the company’s international dimension. In line with what has been

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done in the past, Fincantieri also makes provisions for partnerships with educational bodies and universities to guarantee job opportunities to new graduates, while a joint body on training has been recently established that operates at the national level to promote further dialogue between the employer and the unions. In relation to outsourcing, the collective agreement concluded in June reasserts the employer’s willingness to invest in internal staff and make them more competitive. More emphasis on insourcing and a limited use of external services to complete turnkey projects are illustrative of the company’s future intentions. Stepping up checks on outside suppliers is another key aspect of the new collective agreement, particularly in relation to compliance with rules on remuneration, social contributions, and welfare. In this sense, Fincantieri works closely with employment agencies to make sure contractors comply with labour laws, while concurrently availing itself of well-trained staff.

4.4. The New Industrial Relations System: The Shift from More Dialogue to Higher Work Flexibility The company-level collective agreement of 24 June 2016 marked a turning point in relations between Fincantieri and trade unions. As has been traditionally the case at Fincantieri, the search for dialogue with unions has always characterised collective bargaining. To this end, the new collective agreement provides for more occasions on which the parties can meet and discuss workers’ needs. Since the beginning, the lengthy negotiations that marked the June agreement featured the willingness of both parties to draw on the amicable relations that characterised the agreements concluded at the start of the 2000s. Based on this approach, a “joint technical body” was established which represents the real novelty in the new collective agreement. This body convenes on a monthly basis to share and deal with business issues. The fact that the parties meet frequently ensures that the issues discussed in previous meetings are solved and that results have been achieved. Equally important is that workers – not only those serving as union representatives at the company level – also join the body and are chosen by rotation, depending on the aspects that are discussed at the meetings. Thanks to this mechanism, workers also have a say in the company’s decisions, which thus are not high-handed and might prove effective. The meetings held by the joint technical body are also an occasion to monitor monthly progress on projects in relation to results-based pay and to make adjustments, where necessary. Initiatives to increase the productivity of working units

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and investments in technological innovation are also discussed at these meetings.

5. By way of Conclusion: Promoting Amicable Relations as a Key Element to give Fincantieri an International Reach In relation to the aspects broached in this volume, it is important to point out that the new climate encouraging sharing and cooperation between the parties is essential to ensure the company’s development. In considering the industrial relations model that developed at the start of the 1980s and established in the following years, one cannot fail to note that Fincantieri’s national and international growth was the result of cooperative relations between the parties. The opportunity to make decisions about the company’s productive model without unions digging their heels in – save for possible plant closures – has enabled Fincantieri to plan its future and to engage in amicable discussions with the social partners about aspects that could benefit all those involved. The evolution of Italy’s shipbuilding industry has shown that the projects on which the company and the social partners have fully agreed have contributed to a degree of business development that was inconceivable before. Management should be credited with significant forward thinking, especially in relation to its decision to invest in high added-value market niches, which has generated returns either in terms of profit or reputation, giving the company a leading role in some sectors (e.g. passenger shipbuilding). One should also concede that the social partners have backed the company’s decisions also when these have led to a significant staff reduction, as it has been the case from 1980 onwards. The parties should carry on this way and promote dialogue to put in place the changes the shipbuilding market requires. Examples of this include flexible ways of working and a remuneration system based on increased productivity, which are tools through which Fincantieri faces competitors, among others Mayer Werft, putting on the market high-quality products in the least possible time. The need to meet an increasing demand for large-sized ships requires the company to receive a large number of orders and assign them to those plants that are able to deliver them. On this point, it is advisable for trade unions to encourage and share projects aimed at increasing the company’s competitiveness other than harbouring reservations about the decisions from management to distribute orders among the plants located throughout the countries.

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Fincantieri is open to meet the needs of its workers, and this approach is confirmed by the new policies on occupational welfare, which are meant to bring the parties even closer together. As for trade unions, while their determination to keep all the productive facilities open is understandable, one might note that this goal cannot be achieved by only opposing the management’s decision to outsource certain activities. This is even more so as the shipbuilding industry in Italy has traditionally featured collaboration between large, medium and small-sized companies. The provision of work to external entities shall not be seen as a threat to internal resources but as an opportunity to provide employment to local companies. Furthermore, Fincantieri’s has traditionally made use of outsourcing as a key process to meet demand and to assign internal resources to other tasks with higheradded value. Finally, this form of cooperation contributes to the growth of local industry, which frequently comprises small-sized businesses. To conclude, the analysis of Fincantieri’s evolution of industrial relations and collective bargaining shows that Italian businesses can play a prominent role also at the international level if ideas and objectives are shared with the social partners. In this sense, the evolution process of companies in this sector makes them one of a kind in the international context.

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