Mondragon Group, the world’s largest workers’ cooperative, has grown out of its historical Basque roots to comprise an organisation with global presence. It is also a significant player in the automotive industry components sector with cooperative firms manufacturing components, modules, machinery and tools. Oskar Goitia, MD of Mondragon’s automotive division, tells just-auto editor Dave Leggett how the business is developing and staying true to its founding principles.

Please note that this interview was conducted in October 2009 and first published in Issue 34 of Lotus Engineering's e-magazine proActive.

DL: How is business this year?

OG: To put it in perspective, Mondragon Automocion represents around 10% of the Mondragon Group business. During 2009 turnover in the automotive sector has been around 25% lower than in 2008. We feel that compared to some of our competitors, the reduction we have faced has been less dramatic because of the wide range of products in our automotive portfolio.

The scrappage programs in Europe have also helped to increase production activity during recent months – and they also give us a fairly optimistic short-term scenario. The main worries, of course, are beyond the end of this year when support from national incentive programmes becomes much more uncertain as some schemes come to an end. A progressive reduction of such support may help our companies to adapt to the new situation. If the schemes were to immediately end that would reduce our volumes by at least 10%.

Elsewhere, our operations in Brazil and China have been growing this year.

Overall, our companies have been focussing on costs in order to face the new business era while always maintaining our cooperative principles. Keeping our cooperative DNA has meant relocating some of our labour force to areas of activity faring relatively well during the economic crisis and downturn.

We have also been able with our members to adjust our salary levels to the new demands in the market.

Investments programs, too, have been adapted to future needs.

We also have a priority to research new products and services required in the new electro-mobility model for the future, with new components for the electric vehicles as well as adapting the existing modules and components to the new lightweight and downsizing requirement to fulfil the lower CO2 emissions regulations.

DL: Can you explain how the Mondragon Cooperative works and say a little about the automotive element?

OG: Mondragon Automocion is part of Mondragon Cooperative Corporation, the largest business group in the Basque region and the seventh-largest business group in Spain. Mondragon is a cooperative initiative celebrated on the global stage for its commitment to the cooperative principles laid down by both the founders and Father José María Arizmendiarrieta - the inspiration behind the Mondragon movement.

Mondragon’s mission blends those basic objectives of a business organisation that competes on international markets with the use of democratic methods in its corporate organisation. Important principles include the creation of employment as well as the personal and professional development of the workers and a pledge to develop the local community. Its business approach is contained in its corporate values, which include:

  • Cooperation - ‘owners and protagonists’
  • Participation - ‘management commitment’
  • Social Responsibility - ‘fair distribution of wealth and involvement in the environment’
  • Innovation - ‘continual renewal’.

Mondragon has seen a steady increase in turnover in recent years with a 12.4% increase in 2007 and a 6% increase in 2008 bringing the total turnover to EUR16.78bn of which EUR6.5bn was specifically attributed to the industrial component of Mondragon.

Mondragon as a whole employed 92,773 people in 2008, which represented a net increase of 1,700 jobs from 2007 despite challenging market conditions in most business areas.

In 2007 the workforce was 42.2% female, the resources allocated to community schemes increased by 14.7% to EUR39m and the resources allocated to research and development over value-added decreased slightly to 4.6%.

Mondragon Automocion (MA) is a group of companies supplying some of the world’s main automotive manufacturers and Tier 1 companies. It collaborates with clients at the design and development stages, producing and supplying a full range of components, modules, machinery and tools.

MA currently employs around 9,500 employees. In automotive components, in 2007, turnover rose by 13.5%, a figure that vastly outperformed the sector average, with a significant increase in domestic Spanish business for vehicles produced mainly for export.

International sales accounted for 64% of the total, with a growing contribution by the seven foreign plants, whose output rose 20% and has been joined in 2008 by the three facilities Batz Sistemas built in China, Mexico and the Czech Republic.

Fagor Ederlan Taldea has also completed the commissioning of the new Markulete foundry, the most modern in Europe, characterised by its automation and flexibility, its safety and environmentally friendly approach.

MA is considered to be constituted of both Tier 1 and Tier 2 companies which supply the main global automotive OEMs and many of the Tier 1 suppliers. Some 85% of MA products and functions are supplied to the European automotive sector and 95% of products and functions are supplied to the global automotive sector. Other industries supplied by MA companies include household appliances, railway, aeronautics and solar energy.

Recent highlights for MA have been the prize awarded to Fagor Ederlan as the ‘Best Honda Supplier’ and the good performance of its subsidiaries in Brazil and Slovakia. Maier, Cikautxo and FPK has a outstanding performance in the European market leading with some of their products in the European market.

Batz Sistemas strengthened its international projection through the building of three plants in Mexico, the Czech Republic and China, initiated production in 2008 and will cater for the delivery of pedal sets and handbrake levers for several models at General Motors throughout the world.

The Basque cooperatives Matrici and Batz, part of the Mondragon Corporation, have signed a major contract with Renault Trucks, within the framework of the development of future ranges.

Loramendi and Aurrenak are currently leading the foundry equipment and tooling deliveries and have been the biggest player in the world in fully automated systems to produce cylinder blocks and cylinder heads in iron and aluminium.

In addition to the benefits of having the Mondragon University, companies in MA benefit from the cooperative bank which will stick with a new co-op until they can go it alone and, as well as the cooperation funds which supports businesses in trouble and finances expansion and international activities. Member cooperatives may also be assisted into diversification - since 1956 we have had only one total failure of a cooperative.

DL: Is it difficult to manage the different activities and such a wide range of companies?

OG: There is a very mature organisation working in three main functional activities – the financial, distribution and industrial areas. Each area is as well divided into different divisions with a Vice-President leading each one. The companies belonging to a division are managed by a Managing Director and each company produces executive business plans which are yearly approved by the general assembly and aligned with 4-yearly business plans. Horizontal structures supporting the sectoral orientation allow a very flexible and effective approach to the market, as well as a very stable positioning with our products.

DL: And who are the main customers for the automotive unit’s products?

OG: Modules and components: GM-Opel, Renault-Nissan, PSA, Honda, VW, Mercedes, BMW, Ford, Bosch, Continental…

Machinery and tools: GM, Renault, BMW, Land Rover-Jaguar, Tata, FAW, Mercedes, Volvo Trucks, Avtovaz, Ford, VW…

DL: I see that Mondragon has a very strong historical attachment to the Basque region. Has that held back internationalisation of operations? Can you say something about your strategy for international operations?

OG: The automotive sector is a very globalised sector and therefore we have been following our customers in their internationalisation programs. We have our main footprint in the Basque Country, Spain, Western and Eastern Europe - with a very high exportation level.

In the last ten years we have been establishing manufacturing facilities in Brazil, Mexico and China. The recent crisis situation and the lack of financial resources has idled some expansion activities, but we are strongly committed with our members to increase and ensure employment in our companies.

This means that a better positioning in the automotive world gives us sustainable growth and guarantees our employment goals in our long-term business strategies.

The latest car sales figures shows that some of the emerging countries – BRICs - will contribute more to global automotive growth in the future and therefore Mondragon has already successfully set up some industrial parks in those countries and will continue expanding its activities.

DL: Are you continually looking around the world for other cooperative companies to link up with?

OG: The Mondragon Group is always open to all kinds of cooperation and is permanently in contact with all institutions around the world with which we may share experiences as well as developing businesses together with entities that have similar principles as we have. This does not mean that we only cooperate between cooperatives; we do have joint ventures with other private capital entities as well around the world.

DL: How does the Mondragon bank - Caja Laboral - fit in? Does it provide finance to member cooperatives more cheaply than other banks? Can it help with overseas investments?

OG: Caja Laboral (CL) is a part of the financial business of the Mondagon Group but as a general policy in Mondragon Corporation, the companies are working also with some other banks and financial institutions worldwide. CL is there and can provide support, but it is not the only option for member companies. Also, Caja Laboral is not only providing finance only for Mondragon companies – it is a major competitive bank involved in all the kinds of things that the big banks do.

These days only 20% of the bank’s business is inside the group. It is open to the rest of the world.

DL: If a company chooses to join the Mondragon Cooperative, what are the main benefits?

OG: A very strong organisation focused on supporting participative management models which can operate in any field with a very reliable and high quality standards. The cooperative offers support from the management point of view as well as skilled personnel coming out of the University. There is also a strong Mondragon-owned pension fund and social welfare cover that includes extraordinary support to all members of the cooperative.

DL: Can non-cooperative companies join Mondragon?

OG: No. However, that does not mean that Mondragon belonging companies cannot establish joint venture companies with other non-cooperative companies. The resulting entities are subsidiaries from the Mondragon member company, with the participative management model implemented also. It can be understood as a form of indirect participation in the Mondragon Corporation.

DL: Is Mondragon an example of a mainly Basque phenomenon or are there other cooperatives in Spain?

OG: There are other cooperatives in Spain, but those belonging to Mondragon are basically in the Basque region. Mondragon Group is number one in the Basque country, in terms of business and employment and it’s the seventh-biggest business group in Spain. There are many smaller agricultural and consumers’ cooperatives spread out in Spain and around the world, but with our unique industrial organisation we believe we are the world’s biggest – at least in terms of our industrial activity, financial and industrial. I am not aware of another cooperative group like ours. There are other cooperatives in places like Italy and the US, which are more business associations based around purchasing cooperatives, but none are quite as diversified as we are or structured as we are.

DL: Are you always looking for other cooperatives to hook up with?

OG: That is not a priority and the way it has to work is that a company looks at us and says ‘we would like to join your club’. The initiative should come from the company that sees how we operate and our principles and wants to be a part of it. They just have to meet some requirements if they want to join – it is open and there are no restrictions, but obviously a company that wants to join must meet the cooperative criteria.

DL: Is it difficult for a workers’ cooperative to shed workers when rationalising capacity in a recession?

OG: This comes back to the basic principles governing our activity. Actually, a member of a cooperative of Mondragon does not lose his job and the solidarity process among all companies in the corporation allows us to relocate most of the members in other activities thus retaining jobs.

At the beginning of the international economic crisis most of the affected companies resized the workforce by cancelling the contract of the temporarily employed persons (which by law cannot exceed 15% of the total employed persons in the company). After this, there is salary reduction, relocation and other similar measures are taken to avoid any other employment and jobs reduction.

We manage our workforce in a different way to conventional companies as we are owned by the workforce and there are no unions. It is a participative model and maintaining employment and creating the business conditions to grow and employ more people, helping to develop economic activity in a socially useful way are key.

DL: What happens to profits?

OG: If a company makes a profit, that profit is shared by the group and the group uses the money for two main purposes: one is to support the university and education, also including innovation projects to invest for the future; and the other is solidarity with the other companies not doing so well, to reinforce the balance and stabilise the projects financially.

So companies not doing well are supported by those who are, thus maintaining the overall objectives of the cooperative.

Another part during the profit sharing process goes into new activities and new business promotion. The rest is dedicated to associates and companies to reinvest in the cooperatives.

DL: How do you see prospects for Mondragon’s automotive business in the future?

OG: The main worry at the moment are prospects beyond the end of this year when European incentive or scrappage schemes start to expire. A progressive reduction of incentives rather than a sudden ending may help our companies to adapt to the new situation. If schemes suddenly finish that could create a big fall in volumes – over 10% or more, which would be bad for the whole sector.

We are supplying OEMs across Europe, so what happens in the big manufacturing centres where we supply – Germany, France and UK, as well as in Spain – very important for our business.

However, the strong position of our companies – especially in the emerging markets - as well as our focus on innovation makes us quite optimistic about the future. We are committed to our automotive strategies, strengthening our position in the market and working very closely with our customers. All of these things will bring us more and better business opportunities.

And we believe that cooperation between all players in the automotive business will be increasingly required in the near future due to limited financial resources. This cooperation will maximise the output of the synergies we have developed.

Our participative model as employee-owned companies with committed teams allows us to keep a very competitive position in the market for these new and challenging times.

I think we will see more companies increasing the participation of their employees in the future – it’s a trend we are already seeing.

Overall, next year we expect to keep the same level of business though it will be three or more before the market gets back to pre-crisis levels figures in Europe. It’s a similar situation for our plants in the NAFTA area. The growing areas for us will be India, China and Brazil.

DL: What gives you the greatest satisfaction in your role?

OG: After 20 years in the automotive business with very demanding market conditions, we are now in the middle of a new era. We are in the middle of a complete revolution with new mobility concepts using advanced clean technologies. This scenario gives me the opportunity to develop myself by creating sustainable employment and develop business in this new era.

Innovation and cooperation are now values which are more and more demanded in order to be successful. Having practised these values in our organisation and our personal lives, it gives us a very good starting position for this new part of the race.

Those challenges, as well as being protagonist of this worldwide automotive change, are the most satisfying part of my job.

Oskar Goitia Zubizarreta
In his current role, Oskar Goitia is Managing Director for Mondragon Automocion, a corporate structure that coordinates the activities of Mondragon’s automotive firms. Prior to that, he worked as CEO of Loramendi Group – a Mondragon member – that specialises in manufacturing machinery for the manufacture of cast iron engine block and aluminium engine blocks and heads. He also worked for other Mondragon automotive firms after studying Mechanical Engineering at Mondragon University. He speaks English, German, Spanish and Euskera (the Basque language).

Mondragon – the first steps
Many at the Mondragon Cooperative take inspiration from the arrival in Mondragon of a young priest named José María Arizmendiarrieta in 1941. He is revered as the ‘spark’ which created the cooperative and its ideals.

It is said that his primary concern upon arrival was not the development of business activity but the welfare of his parishioners and a desire to provide opportunities for all as wells as to ‘correct the acute social deficiencies’ of a population still suffering from the consequences of civil war. Father José María is said to have worked tirelessly with the young people of the parish, organising sporting, cultural and educational activities.

Two years after his arrival in Mondragon, Father José María founded the Professional School, the seed which would later become Mondragon Unibertsitatea - the University of Mondragon. This institution has played a vital role over the decades, training many of those who later became key figures in the development of the cooperative project.

Products
Mondragon Automotive, with Fagor and Maier as its leading trademarks, manufactures and supplies components and systems made from the following materials and processes: cast iron, aluminium low pressure and gravity casting, aluminium diecasting, hot stamping, machining, plastic injection and finishing, rubber moulding and extrusion, composites, etc, collaborating in the design, development and manufacture of the final product.

Companies making components and modules: Fagor Ederlan Taldea, Fagor Ederlan Tafalla, Mapsa, Ecenarro, Maier, Cikautxo, FPK and Batz Sistemas.

Companies producing machinery and tools: Loramendi, Aurrenak, Matrici, MB Sistemas, Batz Troqueleria and Fagor Arrasate.

Please note that this interview was conducted in October 2009 and first published in Issue 34 of Lotus Engineering's e-magazine proActive.

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