Nokia has responded with astonishment to the attempt by the North Rhine-Westphalia Bank and local government to reclaim subsidies given to the mobile phone maker in 1999, claiming they invested more money and created more jobs than the subsidy demanded - even though they've now closed the factory. Nokia reckons it received a …
Subsidies should be illegal in EU
That would mean that the jobs were simply transferred from one EU country to Germany who were prepared to pay more.
We really shouldn't let countries compete to buy jobs, because they're only bidding up the price among themselves. That then comes from taxes which causes other industries to be less competitive.
Isn't this also just a subsidy to Nokia? Since when has subsidising a particular corp been accepted?
Give us a handout or we'll close the factory?
Is this like those automotive companies in Australia, such as Mitsubishi, which periodically - like every 4 years or so - threaten to close down their factory unless the Government gives them a mega-buck gift to the tune of hundreds of millions of dollars to stay open? The factory is still making money, just not ENOUGH money to make these greedy bastards happy.
I'm fed up with humongous multi-nationals which make squillions of dollars pulling this trick. Well that's fine, pull out of the country but the Government will take back your factory and all it's assets thank you very much.
Two can play at attaching strings.
@"Subsidies should be illegal in EU "
The problem is that subsidies are well-entrenched not merely in the EU but in the global market as a whole; companies like Dell get sweeteners to locate their facilities in different parts of the US etc. Remove EU subsidies and that doesn't mean you'll get a level playing field, it just means that the jobs and companies will go outside the EU to locations that still DO give subsidies.
Oh Dear, someone standing up to a company that is doing what capitalist companies do!
OK, they are moving on quicker than some, but economic migration is a fact of industrial life. - as that locality knew when they landed Nokia in the first place.
I guess there's some local politicians up for re-election, and happy to spend - sorry, waste - public funds in a futile court case to establish their 'crusader' reputation.
I'll bet Nokia lawyers are rereading the small print, however - especially the difference between "create jobs" and "employ people" - it would be funny if their use of contract labour made them break the terms of the subsidy!
= net benefit of zero?
>"Nokia...paid just as much in tax as they received in subsidy..."
-So in reality Nokia paid NO TAX. But got to keep the profits that this state-sponsored tax-free operation created.
-So it's effectively a form of nationalisation, but without the ownership? Or profit?
-Where's the net benefit to society? Why pray tell, did they not subsidise
>"Nokia reckons it received a total of €41.3m from the bank, compared to its own investment of more than €350m."
-Boo hoo. Poor old Nokia. They should be glad they got *given* anything at all.
>"Nokia...received a total of €41.3m from the bank...to keep 2,860 in work..."
- EUR 41.3m / 2860 people = EUR 14,440.56 per head (GBP 10,801.45 or USD 21,268.06).
- Could they not have used this handout of GBP 10k+ per person and subsidised people working in local small businesses? At least a side effect of this might have been to bolster the local community and give a leg-up to it's businesses rather than provide cheap/free labour for an already succesful global comms company.
Nokia - maybe not as much profit as they thought...
Working in Germany at the moment, I can obviously hear a lot of negative press in Germany about Nokia.
I personally try to stay open minded, but having spoken to some poeple involved, it seems, that Nokia really does have a case to answer.
It might only be a technicality, but at the moment it seems, that it would make Germans feel really good, that one of the subsidy Locusts wouln't get away with it.
I am generally against subsidies, since they are in essence nothing than a bride (I will give you money if you stay and this government looks good, because "we are doing something against unemployment")
That Nokia pretends to be surprised (or possibly is surprised) doesn't surprise me, because they didn't expect that much resistance.
Due to the Siemens / BenQ disaster, Germans are very sensitive to issues like this.
What makes matters even worse, is the fact, that Nokia was making huge profits with this factory in Bochum and Nokia is now working on profit maximisation ("profit at all cost" so to speak) rather than profit optimisation.
So just to squeeze out a few million more (which is not necessarily a lot in terms of profit per share) and some more subsidies, they just close down a plant, which is still very profitable, and holds highly skilled personal.
At them moment there is even research into a German law, which prohibits certain actions, if it is in "bad taste".
This law states that something is not permissible when it appears to go too much against public opinion. For example:
when the borders between east and west Germany opened obviously a lot of people came over. things like bananas where very rare and expesnive in east Germany. Some grocery stores decided to bring the prices for bananas to something like 10-15DM/kg from around .99DM/kg.
Police closed down these shops and most of them were prosecuted for acting in "bad taste" and were fined.
But also the issue with not having employed as many people as they initially promised it's not just ten or twenty, but around 10% less than contractually agreed.
So lets wait and see,
Best regards from Germany
Re: Nick Palmer
On the remember-what-your-mother-said level, two wrongs don't make a right.
On the economic level, you could argue that less subsidies = lower taxes = smaller government = more attractive competitive environment = more attractive to business. Companies would probably prefer to rely on a lower corporate tax rate, which applies to the whole country and is therefore more stable, than handouts from the government that could be withdrawn on a political whim. Unlike nuclear disarmament, unilateral disarmament of subsidies could arguably work.
The above may be pie-in-the-sky thinking (particularly the assumption that subsidy reductions will be spent on tax cuts, rather than bigger ministerial cars and more Tasers). But companies don't necessarily charge from one country to the next depending on whose government hands out more dosh.
I hope it doesn't need to be said, but subsidies do not magically appear out of thin air, they are taken from taxpayers. Had they not been taxed to pay for the subsidies, they would have spent the money themselves, businesses would have sold more stuff, and more jobs would have been created to make more stuff. Market efficiency vs government bureaucratic crapness probably means that individuals spending x million pounds create more jobs than the government taking x million pounds from the taxpayer, shoving alpha*x million into its gaping maw to pay the tax men, then giving it to the subsidy department, who shove beta*x million to the civil servants, and finally give (1-alpha-beta)*x million in subsidy to companies based on dubious criteria.
However, subsidised jobs are the only ones that allow the government to look like it's "doing something". Hence if a government subsidises a factory employing 3,000 people, it's reported as if government subsidy has created 3,000 jobs, when in fact this is utter bollocks and assumes the subsidy has been magicked out of thin air by Gordon Brown in a pink fairy tutu.
Don't blame "greedy" (i.e. rational) companies for taking free money when it's offered, blame the government that nicked it from you and then offered it to them in a thinly-disguised vote-buying exercise.
If removing subsidies from your own area only encourages companies to move elsewhere in the world, then surely there is a simple answer? Apply an import tax that covers any subsidy paid, when the finished goods come back in to your area. Thus levelling the playing field in your own market?
And for Gordon's Next ProxyTrick, .... he'll Need Assistants from the Audience.
"...has been magicked out of thin air by Gordon Brown in a pink fairy tutu."
That would be a YouTube hit/15 Seconds of Fame Wonder.......... but the party piece is a cracker though, for at the end of the day, does it matter where it comes from or is it just keeping some old Nags in clover at the XXXXPense of new Foals. It's only paper working ITs miracles, not a Pink Fairy in a tutu.
If I were Nokia, I'd be careful - look what happened to Poland...
I really hate subsidies in most forms with only exceptions made for things like transitioning away from crude oil through cellulose conversion- something to help make a change for the positive. We in the US grant tax abatements all the time as incentives as well. It's endemic everywhere.
Germany, and others, need to compete on employment, and to do so, they actually need to make it easier and less expensive for companies to go there. This type of behavior actually discourages other companies from setting up shop there if they have no option but to keep it open forever.
Granted, Nokia is making healthy profits, so there's no sympathy like there might be for some company under distress. But still companies need to be able to have flexibility. I say this as US companies are outsourcing to India. We have to adapt- I don't want the US setting up protectionist measures to keep jobs here, as the companies will then just avoid coming here in the first place.
Wonder how this will affect Nokia's sales in DE
I'd like to see those numbers. I doubt that my Bavarian neighbors would exercise that much solidarity with a couple thousand "Preiss" (Prussians - northern Germans), but who knows?
BenQ screwed over a couple thousand German workers not so long ago by bankrupting their joint venture with Siemens (which has troubles of its own), so maybe Germans will take a brief interest in their phones' manufacturers.
It'd be kinda funny if Nokia's extra profits from moving operations were negated by a fall-off in German purchases...
Subsidies should be illegal in EU
Start-up sweeteners do occur all over the world. They are allowed in EU when new jobs would be created that will develop or regenerate a local economy and can be a good thing. The problems start when the jobs turn out to be only short-term so no real benefit occurs. Companies should be forced to repay everything they got with interest so they think every investment through properly and are not seduced by the sweeteners.
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