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Many sources are now reporting that bankruptcy now appears the inevitable outcome for Fagor after Last minute efforts this past week to recapitalise the white goods manufacturer have failed.

The collapse of Fagor Electrodomésticos is reported to be the most serious crisis to face Mondragón for many years with up to 5,600 workers who now face job loss.

Several hundred workers have been occupying one of the plants affected, Edesa in the town of Basauri south of Bilbao, since Monday last week, whilst the town of Mondragón itself saw workers form a human chain outside the main headquarters of the co-operative group earlier this week.

The Mondragón co-operative movement was originally created by a local priest in the mid-1950s, it has grown into a major empire of over 100 co-operative businesses and ventures which together employ 80,000 employees and have a combined turnover of €13bn (£10.9bn). It is one of the top ten Spanish companies, dominates the Basque country economy and also has major overseas interests.

Mondragón is not a single business, rather a grouping of semi- autonomous co-operatives who federate together, contribute financially to group-wide initiatives and jointly establish Mondragón's strategy. The principle of solidarity between member co-operatives is a strong one, and in the past workers facing redundancy in one firm have been re-employed by other co-operatives.

As well as its debts to the Mondragón group, Fagor Electrodomésticos owes money to the banks, to holders of subordinate debt and to suppliers. Some of its employees also have their own money invested in the business (which is usually a condition of becoming a co-operative member in the co-operative). One of the demands of the workers occupying the factory in Basauri was that the Mondragón group should at least ensure that these individuals get their money back. It is not yet clear whether this will be possible or if extra voluntary savings made by some people can be recovered.

The recent decision by the Mondragón Group General Council, to not rescue Fagor Electrodomésticos has led to bad feelings locally. It had previously been suggested that Mondragón's own banking operation Caja Laboral might have been able to help, but Mondragón said that it has already invested €300m in Fagor in recent years and is not convinced that a rescue plan for the firm is viable. It says, however, that the group's Corporate Employment Office will try to help Fagor workers affected and has suggested that up to 1,200 people may be given work elsewhere or helped with early retirement. Mondragón is also hoping for European financial assistance to help staff retrain.

The bankruptcy of Fagor Electrodomésticos, which makes a wide range of domestic appliances including washing machines, fridges and ovens, has implications in the Basque country, and the governments of the two local Basque provinces have been actively engaged in Fagor's attempted rescue. There have also been media reports that Fagor was at one stage investigating recapitalising through investments from US hedge funds.

There are particular fears for the future of more than 50 Basque firms which supplied Fagor. There are also international repercussions. The firm owned a French subsidiary, Fagor Brandt, located in a western suburb of Paris, and one in Poland. Both these firms are now in administration.

At this time there is also no known suitors for the business and it is more likely that the business would be broken up into chunks, probably by brand, to be sold off to new owners.

Electrolux CEO Keith McLoughlin just a few days ago was reported as stating that Electrolux may be willing to buy into other brands such as Indesit, perhaps they may look to take on some of the brands or production capacity owned by Fagor. However, it should be borne in mind that whilst this may seem a logical move, it is clear from this collapse that Fagor, like most other appliance manufacturers in Europe, have been struggling to compete against the tide of cheap, low quality imports from the Far East and Turkey.

It seems that European buyers just want cheap appliances.

That makes the production of appliances in France and Spain, along with the strings attached from union involvement and labour laws, most probably very unattractive to many potential buyers for the business.

Thus making it more likely that once again the brands would be sold off by the administrators for as much as they can get for them. We should stress however that, at this time, the fate of Fagor is unclear and there is no confirmation of what is to happen with the brands as yet.

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