Stitching Labor Change in Italy

PADUA, Italy -- When Italy's Safilo SpA decided to outsource manufacturing of its designer sunglasses, it shut three plants and cut its work force 8% to 3,700 -- with almost no protests from employees.

The smooth transition, a contrast to the strikes and street demonstrations that greeted recent shutdowns at Fiat SpA and Alitalia, is the handiwork of Valeria Fedeli, secretary-general of Italy's 120,000-member fashion-and-textile union Filtea.

Ms. Fedeli is breaking with conventional union thinking in the fight against mounting Asian competition. Instead of calling for protective duties or quotas -- or strikes like her own Italian union bosses do -- she is battling for tax breaks for corporate research, better treatment of subcontractors who work out of their homes, and improvements to Italian products to make them more competitive through better manufacturing.

Italy finds itself on the front lines of the Europe-Asian trade struggle. The country's prosperity has been built on exports from traditional industries such as shoes and textiles. But its textile and clothing industries lost 10,000 workers in 2005, as 2,000 companies closed. Today, the industries employ 580,000 people, down from 670,000 a few years ago. Fashion and textile revenue for 2004 was €43 billion ($52.4 billion), off 10% since 2002.

Italian politicians have been demanding Brussels impose European Union-wide protection against inexpensive Asian imports. The 56-year-old Ms. Fedeli says that approach is wrong: Italy's fashion industry needs to adapt or die.

"I could have pretended nothing was happening, or pointed a finger at the government or companies," she said. "In the end, I think, that would have resulted in less protection for workers' rights."

Ms. Fedeli's first chance to put her ideas into practice came in 2001 when an association of 831 shoemakers, known as Acrib, had to renew its annual labor contract. Running the talks from her cluttered office in Rome overlooking the Tiber River, Ms. Fedeli helped workers get involved in management decisions -- helping create bonuses and recruitment plans for laid-off workers.

The agreement also was innovative because it extended production bonuses to "home workers" who hand-stitch the uppers that form the tops of high-priced shoes. A trouble-shooting panel bringing together unions and employers was established to deal with factory closures and seek places for the workers in nearby establishments.

"These agreements carry Fedeli's stamp," said the textile association's director, Gianpiero Menegazzo. He said the accords represented "a big step forward" in industrial relations.

Over the years, Ms. Fedeli has forged a tight relationship with employers. She has worked with bosses to hammer out strategies on everything from labeling to layoffs. "Fedeli was fundamental in making the union's voice heard," said Gian Domenico Auricchio, vice chairman of Italy's Confindustria business lobby, "and we need more of this type of teamwork in terms of defending Italy's entire manufacturing system."

Filtea is a part of CGIL, the country's largest union federation representing 5.5 million members in a variety of professions. Ms. Fedeli says requests for more staff and more resources from the federation have been unanswered.

This may be changing, however. "Fedeli has done an important job in stressing the need for rules governing the textile sector without resorting to calls for tariffs," said the federation's secretary-general, Guglielmo Epifani. Ms. Fedeli also is head of Europe's textile-union federation, and her ideas have moved beyond Italy to the larger EU stage. EU Trade Commissioner Peter Mandelson worked with her to come up with a proposal requiring non-European producers to label the origin of their textile products, a measure European textile makers hope will cement consumer loyalty to European goods. She also has lobbied for obligatory clothing labeling, research and innovation incentives, and merger incentives for small companies.

When low-priced Chinese textiles and shoes flooded into Europe last year, Ms. Fedeli avoided calls for quotas. Instead, she lobbied for an antidumping investigation, which tests whether goods are being sold below cost to destroy competitors.

In April 2005, with Chinese imports starting to soar, she was part of a trade delegation of textile-producing EU nations that met with Mr. Mandelson asking for limits on Chinese textile imports. At the time she issued a prepared statement headlined "no to quotas, yes to rules and rights." But the EU imposed quotas on Chinese textiles, which backfired, leading to millions of pieces of clothing piling up in Europe's ports.

Ms. Fedeli's pragmatic approach is proving more successful, at least with Safilo, the sunglasses maker. In December 2005, months after the plant shutdowns, the company listed on the Milan stock exchange to raise money for more investment, promising to create jobs. In the end, only 91 of 270 laid-off workers were sent home; others were placed in training programs or at other factories in the group.

The more streamlined manufacturing means quicker time-to-market. Production time was slashed nearly 50%, helping Safilo stay ahead of Chinese producers.