AnarWiki/markdown/Mondragon.md

The **Mondragon Corporation** is a
[federation](Confederation "wikilink") of [worker
cooperatives](Worker_Cooperative "wikilink") based in the
[Basque](Basque_Country "wikilink") region claimed by the
[states](State_\(Polity\) "wikilink") of [Spain](Spain "wikilink") and
[France](France "wikilink"). Founded in 1956 to produce heaters, it
became the tenth largest business in Spain and largest in the Basque
region. As of 2015, it has 74,000 workers.

## History

In 1941, a young Catholic priest, [José María
Arizmendiarrieta](Jose_Maria_Arizmendiarrieta "wikilink") settled in
Mondragón, a town with a population of 7,000 that had not yet recovered
from the poverty, hunger, exile, and tension of the Spanish Civil
War.<sup>\[4\]</sup> In 1943, Arizmendiarrieta established a technical
college which became a training ground for managers, engineers and
skilled labour for local companies, and primarily for the
co-operatives.<sup>\[5\]</sup> Arizmendiarrieta spent a number of years
educating young people about a form of humanism based on solidarity and
participation, in harmony with Catholic social teaching, and the
importance of acquiring the necessary technical knowledge before
creating the first co-operative. In 1955, he selected five young people
to set up the first company of the co-operative and industrial beginning
of the Mondragon Corporation. The company was called Talleres Ulgor, an
acronym derived from the surnames of Usatorre, Larrañaga, Gorroñogoitia,
Ormaechea, and Ortubay, known today as "Fagor
Electrodomésticos".<sup>\[6\]</sup>

In the first 15 years many co-operatives were established, thanks to the
autarky of the market and the awakening of the Spanish economy. During
these years, also with the encouragement of Don José María
Arizmendiarrieta, the Caja Laboral (1959) and the Social Welfare Body
Lagun Aro (1966) were set up that were to play a key role. The first
local group was created, Ularco. In 1969, Eroski was founded by merging
ten small local consumer co-operatives.<sup>\[7\]</sup>

During the next 20 years, from 1970 to 1990, the dynamic continued, with
a strong increase in new co-operatives promoted by Caja Laboral's
Business Division, the promotion of co-operative associations, the
formation of local groups, and the founding of the Ikerlan Research
Centre in 1974.<sup>\[8\]</sup>

With Spain scheduled to join the European Economic Community in 1986, it
was decided in 1984 to set up the "Mondragon Co-operative Group", the
forerunner of the current corporation. In-service training for managers
was strengthened by creating Otalora, dedicated to training and to
dissemination of co-operatives. The Group consisted of 23,130 workers at
the end of 1990.<sup>\[9\]</sup>

On the international stage, the aim was to respond to growing
globalisation, expanding abroad by setting up production plants in a
number of countries. The first was the Copreci plant in Mexico in 1990,
followed by many others: up to 73 by the end of 2008, and 122 at the end
of 2013. The goals were to increase competitiveness and market share,
bring component supply closer to customers’ plants, especially in the
automotive and domestic appliance sectors, and to strengthen employment
in the Basque Country by promoting exports of co-operatives' products by
means of new platforms.<sup>\[10\]</sup>

In October 2009, the United Steelworkers announced an agreement with
Mondragon to create worker cooperatives in the United
States.<sup>\[11\]</sup> On March 26, 2012, the USW, Mondragon, and the
Ohio Employee Ownership Center (OEOC) announced their detailed union
co-op model.<sup>\[12\]</sup>

The industrial sector ended 2012 with a new record €4 billion in
international sales, beating sales figures from before the financial
crisis of 2007-2008. Mondragon opened 11 new production subsidiaries.
International sales that year accounted for 69% of all sales, a 26%
increase from 2009 to 2012, and with 14,000 employees abroad.
Mondragon's share in the BRIC markets increased to 20% compared to the
previous year.<sup>\[13\]</sup> In 2013, international sales grew by
6.7% and accounted for 71.1% of total sales.<sup>\[14\]</sup>

On 16 October 2013, domestic appliance company Fagor Electrodomésticos
filed for bankruptcy under Spanish law in order to renegotiate €1,1
billion of debt, after suffering heavy losses during the eurocrisis and
as a consequence of poor financial management, putting 5,600 employees
at risk of losing their jobs.<sup>\[15\]</sup> This was followed by the
bankruptcy of the whole Fagor group on 6 November 2013.<sup>\[16\]</sup>
In July 2014, Fagor was bought by Catalan company Cata for €42.5
million. Cata pledged to create 705 direct jobs in the Basque Country
and to continue the brand names Fagor, Edesa, Aspes, and
Splendid.<sup>\[17\]</sup>

Mondragon co-operatives are united by a humanist concept of business, a
philosophy of participation and solidarity, and a shared business
culture. The culture is rooted in a shared mission and a number of
principles, corporate values and business policies.<sup>\[18\]</sup>

Over the years, these links have been embodied in a series of operating
rules approved on a majority basis by the Co-operative Congresses, which
regulate the activity of the Governing Bodies of the Corporation
(Standing Committee, General Council), the Grassroots Co-operatives and
the Divisions they belong to, from the organisational, institutional and
economic points of view as well as in terms of assets.<sup>\[19\]</sup>

This framework of business culture has been structured based on a common
culture derived from the 10 Basic Co-operative Principles, in which
Mondragon is rooted: Open Admission, Democratic Organisation, the
Sovereignty of Labour, Instrumental and Subordinate Nature of Capital,
Participatory Management, Payment Solidarity, Inter-cooperation, Social
Transformation, Universality and Education.<sup>\[20\]</sup>

This philosophy is complemented by four corporate values:
*Co-operation*, acting as owners and protagonists; *Participation*,
which takes shape as a commitment to management; *Social
Responsibility*, by means of the distribution of wealth based on
solidarity; and *Innovation*, focusing on constant renewal in all
areas.<sup>\[21\]</sup>

This business culture translates into compliance with a number of Basic
Objectives (Customer Focus, Development, Innovation, Profitability,
People in Co-operation and Involvement in the Community) and General
Policies approved by the Co-operative Congress, which are taken on board
at all the corporation's organisational levels and incorporated into the
four-year strategic plans and the annual business plans of the
individual co-operatives, divisions, and the corporation as a
whole.<sup>\[22\]</sup>

### Wage regulation

At Mondragon, there are agreed-upon wage ratios between executive work
and field or factory work which earns a minimum wage. These ratios range
from 3:1 to 9:1 in different cooperatives and average 5:1. That is, the
general manager of an average Mondragon cooperative earns no more than 5
times as much as the theoretical minimum wage paid in their cooperative.
For most workers, this ratio is smaller because there are few Mondragon
worker-owners that earn minimum wages, because most jobs are somewhat
specialized and are classified at higher wage levels. The wage ratio of
a cooperative is decided periodically by its worker-owners through a
democratic vote.<sup>\[23\]</sup>

Compared to similar jobs at local industries, Mondragon managers' wages
are considerably lower (as some companies pay their best paid managers
hundreds of times more than the lowest-paid employee of the
company)<sup>\[24\]</sup> and equivalent for middle management,
technical and professional levels. Lower wage levels are on average 13%
higher than similar jobs at local businesses. Spain's progressive tax
rate further reduces any disparity in pay.<sup>\[23\]</sup> These low
wages make it very difficult to recruit managers from investor-owned
firms.<sup>\[25\]</sup>

## Business sectors

Mondragon Corporation operates in four areas: finance, industry, retail,
and knowledge, with the latter distinguishing Mondragon from other
business groups. In 2013, the corporation posted a total revenue of over
€12 billion (roughly US$16 billion), and employed 74,061
workers,<sup>\[3\]</sup> making it Spain's fourth-largest industrial and
tenth-largest financial group.<sup>\[26\]</sup>

### Finance

This area includes the banking business of Laboral Kutxa, the insurance
company *Seguros Lagun Aro*, and the Voluntary Social Welfare Body
*Lagun Aro*, which had an asset fund totalling €5.566 million at the end
of 2014. The yield obtained from this fund is used to cover long-term
retirement, widowhood, and invalidity benefits, complementary to those
offered by the Spanish social security system.

### Industry

The corporation's companies manufacture consumer goods, capital goods,
industrial components, products and systems for construction, and
services. The latter includes very diverse business groups such as
Abantail: Adaptive design optimization, Alecop: Engineering training,
LKS Consultores: Attorbeys etc., LKS Ingeniería: Architects and
engineers. MCCTelecom: Telecommunication engineering. Mondragon Lingua:
Translation and language schools, Mondragon Sistemas: Automation,
Industrial Computing and Telecommunications. Ondoan: Turnkey projects in
the energy and environmental sector. In the leisure and sports area, it
manufactures Orbea bicycles, exercise equipment and items for camping,
garden and beach.<sup>\[27\]\[*better source needed*\]</sup>

In capital goods, Mondragon posted a turnover of €976 million in 2009,
and is the leading Spanish manufacturer of machining (Danobat Group) and
sheet metal forming (Fagor Arrasate Group) machine tools. These machines
are complemented by automation and control products for machine tools,
packaging machinery, machinery for automating assembly processes and
processing wood, forklift trucks, electric transformers, integrated
equipment for the catering industry, cold stores, and refrigeration
equipment. Specifically focusing on the automotive sector, the
corporation also manufactures a wide variety of dies, molds and tooling
for casting iron and aluminium, and occupies a leading position in
machinery for the casting
sector.<sup>\[28\]\[*better source needed*\]</sup>

In Industrial Components, Mondragon posted a turnover of €1.5 billion in
2009, a sector in which it operates as an integrated supplier for the
leading car manufacturers, offering from the design and development of a
part to the industrialization and supply of components and assemblies.
It has different business units such as brakes, axles, suspension,
transmission, engines, aluminium wheel rims, fluid conduction, and other
internal and external vehicle components. It also produces components
for the main domestic appliance manufacturers in three business areas:
white goods, home comfort, and electronics. And it manufactures flanges
and pipe accessories for processing oil-gas, petrochemical plants and
power generation, copper and aluminium electrical conductors, and
components for conveyors.<sup>\[29\]\[*better source needed*\]</sup>

In construction, sales totaled €974 million in 2009. Mondragon has
constructed buildings and important infrastructure projects. It designs
and builds large metallic (URSSA), laminated wood and prefabricated
concrete structures; supplies prefabricated parts in polymer concrete;
offers solutions for formwork and structures (ULMA Group) as well as
public works machinery and the industrialization of the construction
process, including engineering and assembly services. The ORONA Group
produces elevators.<sup>\[30\]</sup>

In services to business, sales totaled €248 million in 2008, including
business consultancy services, architecture and engineering, property
consulting, design and innovation (LKS Group), systems engineering for
electromechanical installations, and integrated logistics engineering.
It also offers a modern language service, manufactures educational
equipment, and provides graphic arts services
(MccGraphics).<sup>\[*citation needed*\]</sup>

In 2013, 71.1% of turnover came from international sales. Sales
resulting from the export of products abroad and production generated in
the 122 subsidiaries located in several different countries: China (15),
France (17), Poland (8), Czech Republic (7), Mexico (8), Brazil (5),
Germany (4), Italy (4), United Kingdom (3), Romania (3), United States
(4), Turkey (2), Portugal (2), Slovakia (2), India (5), Thailand (1) and
Morocco (1). Overall, in 2013 these 122 plants provided work for more
than 11,000 people. The corporate industrial park in Kunshan, close to
Shanghai houses seven subsidiaries.<sup>\[31\]</sup> In 2012, it opened
11 new subsidiaries abroad, employing around 14,000 people. Its
international sales that year marked a record number of 69% of its total
sales (€5.8 billion, with a 2% fall compared to the previous year).
Mondragon also participated in 91 international R\&D
projects.<sup>\[32\]</sup>

In 2014, the industrial cooperatives created 1,000 jobs, and
internationalization continued with 125 production subsidiaries abroad -
3 more than the year before.<sup>\[33\]</sup>

### Retail

Mondragon runs Eroski, one of the leading retail groups all over Spain
and in southern France, and maintains close contacts with the French
group Les Mousquetaires and the German retailer Edeka, with whom it set
up the Alidis international purchasing group in 2002. The worker-owners
and consumer-members participate in the co-operative's decision-making
bodies and management of Eroski.<sup>\[*citation needed*\]</sup> At the
end of 2013, Eroski posted a turnover of €6.6 billion, operating 2.069
stores made up of 90 Eroski hypermarkets, 1,211 Eroski/center, Caprabo,
Eroski/city, Aliprox, Familia, Onda and Cash & Carry supermarkets, 155
branches of Eroski travel agencies, 63 petrol stations, 39 Forum Sport
stores and 221 IF perfume stores.<sup>\[34\]</sup> In southern France
Eroski had 4 hypermarkets, 16 supermarkets and 17 petrol stations, and 4
perfume stores in Andorra.<sup>\[35\]</sup>

Retail includes the food group *Erkop*, for catering, cleaning,
stock-breeding, and horticulture with *Auzo Lagun*, a co-operative in
group catering and cleaning of buildings and premises, and integrated
service in the health sector.<sup>\[36\]</sup> In 2008, worker-members
voted to expand the cooperative transformation to the retail group as a
whole, turning subsidiaries into co-operatives, and making salaried
workers worker-members. This process was to be carried out over a number
of years.<sup>\[*citation needed*\]</sup>

### Knowledge

This area has a dual focus: education-training and innovation, which
have both been key elements in the development of the Corporation.
Training-education is mainly linked to the dynamism of Mondragon
University, the significant role that Politeknika Ikastegia Txorierri,
Arizmendi Ikastola and Lea Artibai Ikastetxea play in their respective
areas and the activity of the Management and Co-operative Development
Centre Otalora.<sup>\[*citation needed*\]</sup>

Mondragon University is a co-operative university, which combines the
development of knowledge, skills, and values, and maintains close
relations with business, especially Mondragon co-operatives.
Technological innovation is generated through the co-operatives’ own
R\&D departments, the Corporate Science and Technology Plan, the
corporation's 12 technology centers and the Garaia Innovation
Park.<sup>\[37\]</sup>

The 15 technology centers play a fundamental role in the development of
the sectors of focus. In 2009 they employed 742 people and had a budget
of €53.7 million.<sup>\[38\]</sup> In 2013 its network of technology
centers and R\&D units provided employment for 1,700 people and the
commitment to R\&D\&I matters amounted to 136 million Euros, 8.5% of
added value.<sup>\[14\]</sup> Mondragon has 479 families of Patents for
Inventions, which accounts for 25% patents in the Basque Country,
participating in more than 30 R\&D cooperation projects at the European
level.<sup>\[33\]</sup>