Galaxy is a German company producing a wide range of heating, air-conditioning, refrigeration,…

Galaxy is a German company producing a wide range of heating, air-conditioning, refrigeration, cooking and laundry appliances for home and commercial use. Most of its 30,000 employees are located in the older EU states and the company has an annual turnover of €40 billion. Galaxy has always been focused on making a good return on investments and growing shareholder value and has pursued this goal by prioritizing product innovation, investment in new technology, and developing the capability of its staff. Galaxy has managed to maintain the competitive position of its European manufacturing facilities in the face of growing competition from companies manufacturing in low-cost countries. However, two years ago, the board recognized that this competitive position could not be sustained and that eventually much of its manufacturing capacity would have to be moved to cheaper locations. Galaxy already has manufacturing facilities in India and China but these were built to produce a new range of products and did not involve the relocation of work from existing plants in Europe. Over the next four years, this situation will change. The company plans to close seven plants in Germany, France, Denmark, Italy and the UK, with the loss of 12,000 jobs, and expand production elsewhere in the world. The first closure will involve a German plant that produces refrigeration equipment. A new manufacturing facility has been acquired in China and within nine months it will be ready to commence production of a limited range of high-volume products that have few parts and are relatively easy to assemble. As the capability of the Chinese workforce is developed, the full range of products manufactured at the German plant will be relocated, but it will be two years before all production, including the more complex, high-value products, can be moved. Consequently, while some staff will be laid off in nine months, others will need to be retained for up to two years. Sixty-five per cent of the output of the plant targeted for closure is sold within Germany but the company estimates that the reduction in production costs associated with the move to China will more than outweigh the cost of transporting the refrigeration equipment back to the German market. One concern, however, is how customers will react to the company moving jobs abroad. Employees were shocked by the news that their plant is to be closed and are planning to do everything they can to resist the closure. Employees elsewhere in the company are aware that more plants are likely to be closed.

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