NXP Semiconductors And The Union Respond To Recent Salary Dispute

| About: NXP Semiconductors (NXPI)

Yesterday, Seeking Alpha published my article regarding a dispute between NXP Semiconductors (NASDAQ:NXPI) and the unions in the Netherlands. Soon after the article was published, the company's Head of Global Corporate Communications, Mr. Pieter van Nuenen, contacted me and asked me to consider publishing NXP's official statement regarding the matter. I agreed to take NXP's reaction into account. Further, I provided the union with the opportunity to respond to the dispute as well. The union did respond to the matter through Union director Mr. Gerald Maenen. In this article, I provide the official statements of NXP Semiconductors and the union regarding the salary dispute between both parties.

Summary of the dispute

The article "Strikes Hit NXP Semiconductors, How Bad Will It be?" provides an insight into the dispute between the company and the union FNV. As a result, 450 employees stopped their work for a couple of hours last Tuesday. The union prepares another event, scheduled on March 12, 2014. I argued that the dispute might become a problem for NXP Semiconductors and I lowered my outlook for the stock.

NXP's reaction to the actions of the unions in The Netherlands

Over the last weeks NXP has repeatedly invited the unions to resume negotiations regarding the collective labor agreement for NXP's employees in The Netherlands.

On February 12, 2014 the unions issued an ultimatum to NXP - that ended on Tuesday, February 18 at 12.00 - in which they demanded NXP fully agree with the final offer of the unions. NXP had already informed the unions the company would not agree with their final offer.

In NXP's view, the unions didn't do everything within their capability, to come to an agreement. Therefore NXP finds the ultimatum and actions premature.

NXP would like to reiterate that the wage demands of the unions (3 % increase by January 1, 2014 and 1.5 % by October 1, 2014 ) are unrealistic in comparison with the agreements on wages that have been made between employers and unions in the rest of the Netherlands: with an average salary increase of 1.3 % (source : AWVN).

The high wage demands of the unions are partly motivated by their desire to restore purchasing power. NXP says it's remarkable that the unions demand the company to fully compensate the loss of purchasing power. Especially because the loss of purchasing power is mainly caused by current economic reality and related tax measures.

NXP favors raising salaries now that the company's financial results are positive. NXP is very committed to responsible salary development, and to a responsible salary increase: our offer is a salary increase of 2.25 % in 2014, in combination with a small increase in the employee contribution to the pension fund. In addition to this, NXP also offered a salary increase for 2015, again with a small increase of the employee contribution for the pension plan.

NXP sincerely is hoping, to resume negotiations with the unions quickly and to come to a new collective agreement for the employees in The Netherlands.

For more information check out the company's corporate website.

Union's reaction to the dispute with NXP Semiconductors

General arguments to support our 3% salary increase

Domestic spending in the Netherlands did not increase much the past years, because the employers did not provide the employees with normal salary increases. As a result, a lot of employment was lost the past years. Since the crisis in 2008, the unions demanded modest salary increases, even below the level of inflation. The current growth contributes to large export companies and its management. The domestic spending will remain low, if corporate profits keep flowing to the shareholders and not the employees. For the union, this is an additional argument to demand the 3% salary increase.

Other general arguments to support our 3% salary increase

The inflation was 2.5% in the Netherlands last year (source: CBS). The union demands a 3% salary increase. This will improve the employees purchasing power with only 0.5%. Our salary demand represents some compensation for the modest salary increases in the past years as well. Further, the government increases most taxes this year. This will have a negative impact on the employees overall purchasing power. The union did not oppose the government's plans to increase taxes, saying that the union will demand higher salaries to make up for the lost purchasing. Last, the salary expenses are just a part of the total production costs.

Specific arguments to support our NXP salary demands

We stalled the negotiations with NXP on January 13, 2014. NXP declined our final offer and did not respond before our deadline passed on February 10, 2014. We consider our salary demand as fair and there should be enough room for a salary increase at NXP Semiconductors. If NXP seriously considers our demands, we would be the first to start the conversation again.

Mr. Gerald Maenen, director of FNV Metaal: "NXP had a great year. They performed better than most of its competitors and earned 34% higher profits and much higher revenue compared to 2012. NXP's employees made a major contribution to achieve these results and would like to see their hard work be rewarded. Therefore, the willingness to support our actions is high among NXP's employees.

The union demand a change in the current bonus scheme as well. The current bonus payments are not fair and is not beneficial for the low and mid-level employees. The union proposes that the current 3% bonus is converted in a 2% fixed salary increase and the current 5.5% bonus is converted in a 3.3% fixed salary increase.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.