3.2 Mondragon Cooperative Corporation (MCC), 3.2.2 Mondragon Cooperatives: Current Size and Scope

The Mondragon Group of cooperative enterprises began with a single company and two dozen people in 1955-56. Today, some 60 years later, Mondragon has become a major internationalised network of businesses with a combined work force of over 80 000 employed in 110 cooperatives, 147 subsidiary companies, 8 foundations, 1 benefit society, 10 umbrella organisations and 13 international services all of which are integrated into the Mondragon Group. In 2012, the Mondragon Group network of industrial and retail sales totalled approximately $13billion (total revenue $14billion); its Financial Group (comprised mainly of a cooperative bank, Caja Laboral Popular, and a cooperative social security/insurance organisation, Lagun Aro) had over $23 billion of various financial assets under management. Mondragon Group is the leading producer of domestic appliances and machine tools in Spain, the largest Spanish-owned retail food distribution company in the country (through the Eroski group) and one of the largest suppliers of automotive components in Europe. Among its other products and services, one can also find automated manufacturing cells, electronic components, satellite dishes, medical equipment, large metal structures, industrial presses, bicycles, management and engineering consulting, software development, and on-line training systems just to name the important ones.

Aside from substantial growth and diversification, Mondragon Group has also maintained an impressive record of business longevity and employment stability. This record can be explained by several factors, some of which reflect favourably on Mondragon, and other of which have been sources of criticism. First, the survival rate of new ventures in the group has always been very high, over 90% overall, and nearly 100% in the first 3-4 years. This compares to an approximately 44% four-year survival rate for start-ups of conventional businesses in the United States, and approximately 71% three-year rate in the UK. Second, the group has a strict no-layoff policy for worker-members. Hence, almost all workers coming from the small number of firms that have closed over the years were relocated to other companies of the group. Third, the no-layoff policy further means that enterprises that may not be in serious trouble, but are facing declining demand, do not lay off worker-members but rather transfer them to other businesses in the group that are operating on sound economic bases.

Related to the no-layoff policy, Mondragon seeks to turn around firms that get into trouble in order to protect jobs and ensure community economic stability. A number of Mondragon companies probably would have been closed at one time or another if conventional business criteria had been applied. But because of Mondragon’s business philosophy and commitments, feasibility studies are carried out in problematic firms. Following these studies, many of these problem firms are restructured with the help of sister-companies and Caja Laboral preferential financing. Most of the group’s restructured companies have become again profitable. Anecdotally, the bus body manufacturing cooperative, Irizar—since 2008 not part any more of the Mondragon Group—is an example of that turnaround policy. It was near bankruptcy in the early 1990s, but was turned around with Mondragon institutions’ help and the distinct leadership of Koldo Sarachaga. It is now the second largest manufacturer of bus bodies in Europe and by many financial criteria one of the most successful Guipuzcoan cooperatives.

These three contributing factors to business longevity and employment stability generally reflect favourably on the co-op network’s efforts to ensure social and economic success. However, other Mondragon Group policies—including those related to overseas operations and non-member workers—are more controversial.

Leave a Reply

Your email address will not be published. Required fields are marked *