Nokia’s plant ‘lured away by EU cash’

Nokia’s closure of its German production plant in Bochum, a city in the western state of North Rhine-Westphalia, and subsequent move of its production to Romania might have been in part caused by the Romanian region’s use of subsidies from European Regional Development Fund to attract Nokia. The new production plant in Romania is expected to produce mobile phones at a fraction of what production cost in Germany.

European Commission President José Barroso denied these claims and said “If it is possible to move jobs from Finland to Germany, then it must also be possible to move from Germany to Romania.”

Job losses will include the 2,300 Nokia employees at the factory in Bochum. An additional 2,000 jobs at Nokia’s suppliers might also be in danger.

Nokia received €88 million in subsidies from the government of North Rhine-Westphalia. The economics minister of North Rhine-Westphalia, Christa Thoben, is checking to see if Nokia will have to pay back €17 million of these subsidies. Thoben said that Nokia assured her that it would guarantee 2,856 jobs in the long-run. Currently, only 2,300 people work at the plant. The job guarantee expired in September 2006.

Both sides of the political spectrum are opposing this decision. Jürgen Rüttgers, governor of North Rhine-Westphalia and member of the centre right CDU known for populist attacks on foreign investors, called Nokia “subsidy locusts.” The German term “Heuschrecke” – meaning locust – is a widely used word referring to profit-hungry, often unscrupulous foreign investors, mainly private equity and hedge funds. Hannelore Kraft, head of the centre-left SPD in North-Rhine Westphalia, called for social action against Nokia.

Nokia’s departure is part of a greater trend of handset manufacturers deciding to move production outside of Germany. BenQ closed its plant one year ago and Motorola moved its manufacturing out of Germany six months ago.