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Labor. When the financial crisis pushed a factory to the brink of closure, dozens of employees decided to put their severance pay to better use — as collateral to buy out the company.

Italian steelworkers save the factory — by buying it

A 15-pound cake and several bottles of champagne accompanied the opening ceremony Thursday of WBO Italcables in this suburban town on the outskirts of Naples. The factory workers had something to celebrate: In October, they shipped out their first order to the United States, and in a few days they would send another.

Italcables isn’t a typical steel factory, and this wasn’t a typical opening ceremony — it was a rebirth for the company and a second chance in the careers of the 51 employees who now work there. When the company went bankrupt in 2013, the workers were presented with a stark option: a €30,000 consolation and few prospects in a merciless Italian job market. But rather than taking their money and walking away, they offered it to their liquidators and demanded their right to buy the company.

When Italcables went bankrupt, the liquidator was going to start selling off the plant, “piece by piece,” said Matteo Potenzieri, a production engineer. “We knew that when the first machine came out of the shed, our future at Italcables would disappear.”

So he looked for a solution in the same place anyone would.

“I started searching the internet,” he said. “I found other workers in the north and central Italy who had reopened their production sites, forming a cooperative and taking over the management. We met, and we talked. Every document we drafted was shared with everyone. Two years of hard work, but we did it.”

While cooperatives are fairly common in Italy, this is the first time steelworkers have bought out their company. The new cooperative board comprises three executives and four workers. Everyone has invested €25,000, and at the end of three years, the employees will have purchased the company. On Thursday, Labor Minister Giuliano Poletti and local government officials attended the christening, throwing their support behind an operation that could become a model for keeping jobs in Italy.

“When there are wire rods in the factory, that means there is work,” Poletti said. “These workers are proof that the cooperative instrument can help give concrete answers to the needs of the community. It’s a sign of active participation and shared responsibility. But it must also work elsewhere, starting with the logistics.”

Before July 2008, the factory was owned by Redaelli, a Milan-based firm that produces steel cables for everything from bridges and dams to drilling rigs and railway infrastructure. The site employed about 100 workers, and half their products shipped overseas in Europe, North Africa and the Americas.

But that summer, Redaelli’s Caivano plant was purchased by Italcables, which itself was owned by a Portuguese company, Companhia Previdente. In 2009, the global financial crisis began to cut the legs off of Companhia Previdente, and Italcables was forced to start slashing production. A factory in Sarezzo, Italy, closed first, leaving only administrative headquarters, followed by another factory in Cepagatti. Only Caivano was left — but barely.

The problem was the banks. The credit crunch by now had swept across the European Union, sucking the air out of the firm. Vendors couldn’t afford to wait as payment times dilated. The demand for goods was still there, but the company lacked the cash flow to keep going.

By early 2013, the vendors withheld supplies. Companhia made a last-ditch effort to save production: The plan was to freeze the debt, restructure and pay cash for raw materials. While the suppliers agreed to the terms, the banks refuse to cooperate and the plan faltered. In January 2013, Italcables closed its doors but kept fighting through June to strike a deal with its creditors and the banks. But the banks still said no. The Caivano site had no choice but to agree to liquidation.

“The workers took to the shed, like many other workers in Italy, claiming the right to retain their jobs. Nothing bad happened because we were lucid,” said Potenzieri, the production engineer.

After finding role models on the internet, the workers sought out professional help.

Three investment firms — Legacoop, Coopfond and Banca Etica — and the Cooperation Finance Company, now owned by the Ministry of Economic Development, invested €300,000 and helped the workers structure the buyout. The participation of the ministry was decisive in their negotiations with creditors.

“In March, we were given a further six months to define the plan,” Potenzieri said. “We found an accountant who believed in us and who entered into the cooperative. He made the business plan. We will also be working with one of the administrators who was working in the [company] headquarters in [Sarezzo], an emigrant to the opposition.”

In October, they began rehabilitating the factory: rearranging the warehouses, restarting the machine maintenance (for now they only use half the equipment), the first tests, calling vendors. It wasn’t easy after two years dormant, but the first shipment is already across the Atlantic. Potenzieri still makes cables and bars, but is now also the chairman of Cooperative WBO Italcables.

Only half of the workers remain from the factory’s peak, but in a few years they could hire another 20 employees, bringing the number back to 2009 levels.

“Our sales manager, an engineer globetrotter, was the first to lose his job, but he remained in the industry,” Potenzieri said. “When we told him we started the cooperative, he came back. Even the customers were happy to continue to be supplied by us. We feel strong responsibility for what we are doing. The risks are there. The problem of liquidity and the banks, for example, is not entirely solved. Here in the south it’s particularly difficult.

“We didn’t see solutions, so we took care of ourselves,” he said.

The challenge now is to replicate the Italcables model. In a region at risk for industrial desertification, the factory’s example proves that €30,000, which might have accompanied each employee into unemployment, was instead invested in their future. Union officials are interested in helping other companies take advantage of measures such as the right of first refusal to rent or purchase.

“The idea is to address other crises using the tools available to convert the site into workers’ cooperatives,” said Marino Murrone, of the Metallurgical Employees Workers Federation of Naples.

The model works, but not all the problems are solved.

“For Italcables, the cooperative members invested the funds allocated for their severance,” Murrone said. “They were able to do that because they were grandfathered into the old safety net rules: In the south, severance pay could extend up to four years. With the new rules, the times are reduced by half, and, consequently, the amount is also less. For the same project they would have had to borrow.”