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Feature 20 Jun 16

'Serbia's Detroit' Faces Return to Hunger Years

The city of Kragujevac, known for its auto industry, is facing a nightmare after major employer Fiat said around a third of workers in its factory would lose their jobs after August. 

Aleksandar Djordjevic, Milivoje Pantovic
Productionj of Fiat model 500L in Kragujevac. Photo: Beta

During the communist era, the Serbian city of Kragujevac was known as Serbia's Detroit because of the size of the automobile industry in the city.

All that changed in the Nineties, when, because of sanctions and war, industry stopped working and Kragujevac become known as “the valley of hunger”.

That changed in 2008, when Fiat came back to the town, opening the partner FCA factory with the government of Serbia.

Jobs in the factory were heavily subsidized but workers saw light at the end of the tunnel and hoped good times were coming back to Kragujevac.

Now the management of Fiat has said that sales of the model Fiat 500 l are poor and that many jobs will be cut. Locals in Kragujevac are fearful once again.

“It was shock when we found out that a third of the workforce will be laid off. That is more then 1,500 people, about 900 in the Fiat factory and the rest from the partner factories that supply Fiat,” said president of the Union in FAC Zoran Markovic.

He said the company would offer the jobless workers a plan, and they will also receive severance pay, but they have not specified how much.

During the last year, unions held negotiations with the management in which they agreed that there would be no layoffs but also no salary aises, so the layoffs came as a surprise.

“We have written to the Prime Minister but have not received an answer. On Monday we will organize a protest in Kragujevac and ask the government to get involved,” said Markovic adding that Fiat was obliged by contract to start making a new model of car in 2014 but that had never happened.

According to Markovic, the state has lost interest in this company, although it holds 33 per cent of shares in the company.

“At the meeting with the company management, it was said to us that they had already talked with Prime Minister Vucic and the Finance Minister, who told them [Fiat] to make arrangements with us, the union,” said Markovic.

Markovic stated that there had been concerns about the future because the contract between Serbia and Fiat expires in September 2017, and workers were wondering what would happen with the factory and the jobs after that.

The contract between state of Serbia and Fiat, which defines each party's responsibilities in the partner FCA company, is still a state secret.

There is no public information about the subsidies and or about how much money Fiat received from Serbia to open the factory in Kragujevac.

When production of the model 500L started in 2012, in the first year it produced 117,000 units, but there was no further information from Fiat or the state about how many units were produced a year later.

Workers willing to talk to BIRN asked to stay anonymous since the list of layoffs is not yet out, and they do not want to find themselves on it.

One worker in FAC, who works on quality control, said that the opening of the factory had been like a dream, since a multinational company had opened much-needed jobs in the auto industry.

“Most of us workers took out loans to solve life's issues, since we thought that we had stable jobs. But, ever since 2014, when production dropped, we started to worry, knowing it would not end well.”

He added that all the workers who got jobs in FAC enjoyed better conditions than they had experienced in previous jobs.

Another worker, who is not working in FAC but in a cooperative company that provides services and parts for FAC, said they had been expecting layoffs for more than a year.

“We were working in three shifts only thanks to state subsidies, and the scale of production was not enough for the three shifts that are currently operate,” he said.

He confirmed that at least 900 people will lose their jobs in Fiat FAC and more than 600 will also lose them in the partner companies.

In city council there is fear and concern about how the layoffs will impact on locals whose memories of the “hungry” years are still painful.

“We were surprised by the news of the layoffs, but we knew that exports were falling since 2013, so it was logical,” a member of the city council, Radomir Eric, said, adding that in talks with locals, “fear is starting to prevail”.

He said the city council was not officially informed by FIAT of the massive layoffs; the union had informed them.

“This will drastically reflect on the city budget. According to the first rough assessment, 40 million dinars will be lost just from personal income tax,” Eric told BIRN.

“People will spend less, so there will be fall in economic activity in Kragujevac. We formed the city administration just four days ago but are already thinking how to soften this blow,” added Eric, expressing also a hope that Fiat will contact the city council.

BIRN asked Fiat to comment on the situation but, despite a promise to answer, there was no reply by time of publication.

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