Strategy

Germany to Nokia: Give Back Subsidies

Officials of one state governmnet there expect the phone-maker to pay for closing a plant.
Stephen TaubFebruary 6, 2008

A state government in Germany wants a refund from Nokia. State officials are asking the giant Finnish cell-phone maker to give back $60 million in subsidies for a decade-old manufacturing plant it plans to close, according to the Associated Press.

In the late 1990s, the North Rhine-Westphalia government, through its state-owned NRW.Bank, provided Nokia about 41 million euros in investment subsidies to build a plant in Bochum, in the industrial Ruhr region, according to the AP.

Last month, Nokia announced it would close the plant, which would likely result in 2,300 job losses, upsetting German unions and politicians.

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It wasn’t the first time government officials considered Nokia’s attitude toward the plant controversial. The state economy ministry has accused Nokia of not creating the minimum number of full-time jobs as its law requires. According to the AP, the ministry released a statement saying that employee number has been below par since 2002.

In a statement, Nokia disputed the German state’s claims. “Nokia is astonished by this,” the company said, adding that attempts to recover the claims are “without merit.”

Nokia also asserted it has fulfilled the conditions of the agreement. “Since 1999 Nokia has invested more than 350 million euros in the Bochum site, well above the amount stipulated in the agreement,” the company said. “Since 1999, Nokia received subsidies via NRW Bank totaling 41.3 million euros. Thus, Nokia’s investments in the factory clearly exceeded the sum it received from the state.”

According to the AP, the German factory makes 6 percent of Nokia’s handsets, but consumes 23 percent of its global labor costs.