Now that Fagor Electrical Appliances has fallen, Lagun Aro EPSV (a part of Mondragón, the largest cooperative group in the world) could also go down. The company does not have the 200 million that it needs to pay to cover unemployment benefits for 1,600 members of the cooperative that could possibly leave the company. The good news is that the pension fund, which was overhauled in 2010, is a separate fund than the unemployment fund.
At Mondragón they are denying that the Fagor crisis -- one of the biggest that the group has experienced next to Eroski, Caja Laboral and Orona -- could have major consequences for other companies within the group. What's true is that the group was not prepared to face the consequences of a breakdown that seriously threatens one of its leading brands. Until now, Mondragón was assuming that the problems experienced by small- and mid-size companies because of pre-retirements and excess staffing were the worst in the entire group.
Still, Lagun Aro warned its 29,531 partners that it needed extra cash. But there was not a plan for a situation like this. It's hard to understand how after Fagor lost money for years the cooperative will not reduce the number of jobs, most of which are in the Basque country, or close factories outside of Spain that are not performing.
Hard measures, but most of the companies have had to make them in order to endure the crisis. Not doing so would put Mondragón in a tought spot even though the group is talking about pumping more capital into Lagun Aro in order to mitigate the risk that it is causing for other companies within the group.
