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Nokia Refuses to Repay 41 Million Euros in German Subsidies

Nokia has rejected a demand by a German state that it repay massive subsidies after not maintaining a large enough staff. The company announced last month that it would close a German plant, slashing at least 2,300 jobs.

Nokia

The Bochum plant closure raised questions about the legitimacy of state subsidies

The world's leading mobile phone maker, Nokia, rebuffed a request on Wednesday, Feb. 6, from the western German state of North Rhine-Westphalia to repay the 41 million euros ($60 million) in subsidies it had received in 1998 and 1999.

The money was intended to boost employment at a Bochum plant that Nokia has said it will close by summer. According to the subsidy deal, Nokia agreed to employ 2,860 full staff members with benefits, but it allegedly fell short by 200 to 400 posts between 2002 and 2005.

Nokia said in a statement released Wednesday that it strongly believed that it had acted correctly, adding in a statement that "the facts currently available do not support the planned attempt of the NRW Bank and local government to try to recall the subsidies."

The Finnish company also said that it was "astonished" by the German claim for compensation, adding that it had invested more than required in the Bochum plant and that a high number of temporary workers compensated for the staff deficiencies.

Bochum closure draws heavy criticism

Nokia demonstrator

Nokia took heat from all sides for the closure

Last month, Nokia sparked fierce protests in Germany with its decision to close the profitable Bochum plant due to high personnel costs. The factory's staff of 2,300 and 1,000 temporary employees is expected to lose their jobs by mid-2008.

Most of the plant's production will be moved to Romania, where a new factory is set to open soon. Just this week, the German subcontractor in charge of building the Nokia plant was fined 16,000 euros by the Romanian government for not registering 161 foreign employees with the labor office.

In a commentary written for the German daily Frankfurter Rundschau, German Finance Minister Peer Steinbrück criticized Nokia management for their "economic tunnel vision" in closing the Bochum plant.

They didn't decide to close the factory "because they were losing money, but because they didn't make enough profit," wrote the minister.

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