Discord At The Factory: All Is Not Well At Pelikan’s Peine-Vöhrum Plant

Protest cartoon stock image

COVID-19’s global impact on just about every facet of human life has been far reaching and felt in a way that hasn’t been experienced for nearly an entire generation. Many businesses have already failed due to the unique stressors imposed by the coronavirus pandemic. Other industries have been forced to completely retool the way that they approach their operations in an effort to mitigate the impact upon their business. The reasons for why some have succeeded where others have failed are numerous and vary by industry. To better understand Pelikan’s own trials during this time, I had previously reached out to Jens Meyer, Pelikan’s Global Marketing Manager for Fine Writing Instruments. He was good enough to respond to my August 2020 and April 2021 inquiries and relay some of the problems his division has faced. Some of the challenges cited included issues with the factory’s on-site work force due to government imposed COVID-19 work restrictions, delayed acquisition of raw materials necessary in the manufacturing process, and increased shipping times which had held up the delivery of finished goods to Pelikan’s distribution partners. These impediments have left the company’s vendors without stock and new releases have been running well behind their usual robust schedule. With each missive, Jens did strike a note of optimism that the plight faced was being worked through as best as could be expected. The struggles noted would be challenging for even the healthiest of companies to surmount. Any business already confronting issues pre-pandemic would certainly experience an exacerbation of those prior tensions in addition to a slew of new problems. Such is the case as it relates to Pelikan whose tribulations have now been laid bare within the German press. While some have long suspected a more opaque back story than what had previously been acknowledged, it now seems that the issues run far deeper than anything previously reported. Read on to learn of the unrest that has bubbled to the surface at Pelikan’s Peine-Vöhrum manufacturing plant earlier this week.

Mr. Loo Hooi Keat, President, CEO, and chief executive officer of Pelikan

Before diving into the specific troubles that have come to light in the German media, it is important to understand some of the history and structure behind Pelikan’s current operations. Due to a series of miscalculations, Pelikan filed for bankruptcy on May 1, 1982. Between 1983 and 1984, the company was subsequently broken up and various divisions sold off. A Swiss based holding company known as Condorpart AG was the recipient of many of those entities eventually becoming the majority shareholder of the company by January 1, 1994. Metro founder Otto Beisheim was in charge at this time. On October 1, 1996, GOODACE SDN BHD, a Malaysian company, invested heavily and assumed a majority stake in the company. Pelikan has been a Malaysian held firm ever since and consists of a densely nested corporate structure. Pelikan International Corporation Berhad (PICB), which is listed on the Malaysian stock exchange, was subsequently formed and, over many years, has worked to consolidate the business and unify the brand, a feat which by and large has been successful. Pelikan International controls Pelikan Holding AG in Switzerland under which the sales and production divisions of Pelikan’s fine writing instruments fall; Pelikan PBS Produktionsgesellschaft mbH & Co. KG. In addition to the various Pelikan branded properties, the parent company has also managed to acquire Geha, Herlitz, and Susy Card over the years. At the head of all of this since 1997 is multimillionaire Loo Hooi Keat (depicted above) who functions as the President, CEO, and Chief Executive Officer for the company. A certified public accountant by training, he has a long history in international finance and business management. Despite being Malaysian owned, Pelikan’s fine writing instruments remain true to their German roots with corporate offices located in Hannover and manufacturing just 24 miles to the east in Peine-Vöhrum. Production was relocated to this site in 1973 after it was determined that the prior facilities on the Podbielskistraße were inadequate and could no longer be expanded to meet the company’s needs. None of the company’s fine writing instruments are produced outside of Germany at this time.

Pelikan's corporate structure

A diagram depicting Pelikan’s complicated corporate structure as of December 31, 2020 (click to enlarge)

With a better understanding of the corporate structure, let us dive in and try to dissect the last week of German news coverage. First, however, a disclaimer. What follows has been derived from translations of the original German text which may introduce some inaccuracies. Also, there is always the inherent risk of bias in the media, so I caution everyone to review the original texts for themselves in order to draw their own conclusions. Management at Pelikan’s Peine-Vöhrum plant, which currently employees around 230 workers, is alleged to have yet to make good on the full Christmas bonuses owed to their workers as had previously been promised. Payments have instead been made in delayed installments. A memo reported to be from the plant’s management and released at the end of March (2021) stated; “Despite all your efforts and concessions, the company’s financial situation is still tense…”, seemingly put forth in an effort to justify further postponement. More recently, the employee’s June 2021 wages were delayed as well. Not being able to meet the promised compensation owed its workers speaks to a potentially serious financial crisis facing the company. The Hannoversche Allgemeine (HAZ) received a copy of a statement again attributed to Pelikan’s plant management and addressed to their employees. In that memo, it was related how an increase in the price of raw materials along with an already tense financial situation would result in the company having to find significant cost savings for the month of June. These issues, unfortunately, are not acute but they have been exacerbated by current events. Information in the German press indicates that the factory is only receiving some of the raw materials necessary for production which has resulted in interruptions in the manufacturing processes, an issue which has worsened over the past few months. While some have claimed that this is due to the company’s inability to make their payments in advance for said materials, Pelikan’s commercial plant manager, Rainer Niermann, maintains that bottlenecks in the supply chain due to coronavirus are to be blamed.

Pelikan's Peine-Vöhrum manufacturing plant

Pelikan’s manufacturing plant in Peine-Vöhrum where the company’s fine writing instruments have been produced since 1973

A look at the company’s annual report for the year ending December 31, 2020, shows that revenue and profit have been on a steady decline since 2017. Last year’s revenue was down 8.1% when compared with the year prior (RM1.0 billion in 2020 vs RM1.06 billion in 2019) as sales shrunk when the global economy contracted. Keep in mind, these numbers are reflective of Pelikan International as a whole whose global business encompasses many product lines that go well beyond just the fine writing instruments division. Many of Pelikan’s factory workers at the Peine-Vöhrum plant are organized under the Industriegewerkschaft Bergbau, Chemie, und Energie (IG BCE) which is the third largest trade union in Germany, claiming some 661,000 members. Cihan Yüksel, a union secretary of the IG BCE, has been on record claiming that Pelikan’s management has pursued austere fiscal policies for years resulting in concessions such as employees having to forego part of their collective wages just to keep their jobs. Despite this, the workforce at the plant has been cut by more than a quarter over the past several years (the factory employed over 300 people in 2012). Past promises about investment in the plant to promote increased modernization have also not been actualized. A recent article relays a deal having been struck between management and employee representatives a few years back to modernize production, but little has been achieved on that front due to a lack of money for such an investment. It was hoped that a two million euro expenditure into the plant would be realized this year but that seems wholly unlikely at this juncture. Workers have been further disgruntled by Mr. Loo Hooi Keat who terminated the company’s social plan, previously negotiated to and agreed upon in 2014. In Germany, to the best of my knowledge, a social plan is basically a form of post-employment benefit more socially inclusive than what we have here in the USA, meant to assist workers in finding new employment. It usually is called into effect when a certain number of employees have been let go, that threshold depending on the size of the business. Mr. Yüksel and others are concerned that such a move on Pelikan’s part might be a precursor to anticipated larger scale layoffs which may be looming. For their part, plant management has denied that any large scale layoffs are in the wings.

IG BCE trade union logo

Frustration boiled over on Monday, June 28th as 150 or so of the plant’s 230 employees took to the factory’s parking lot on their lunch break to protest the situation. Organized by the union, news coverage of the proceedings depicts workers carrying red and white flags emblazoned with the IG BCE logo, red baseball caps, and noise makers. You can find a gallery of photos from the event located at the IG BCE’s website. Mr. Yüksel was observed with a megaphone and is quoted as shouting to the crowd; “It cannot go on like this! Promises are broken again and again, and the hopes of the employees are bitterly disappointed. Now the general social plan has also been canceled in order to cement poorer conditions.” In response to the concern for potential layoffs, he defiantly shouted; “But we will take action against this with united forces.” Pelikan’s factory employees have given up much over the years in order to secure their ongoing employment. One such worker, Reinhold Rothe, related to the HAZ that employees have given up five days of vacation and 12% of their collective wages in a bid to keep their jobs. In return, they were given assurances for their good faith, and many are now findings those assurances nothing more than empty promises. Works council chairman Walter Dettmer has been quoted as saying; “Mr. Loo, that’s enough. It cannot go on like this. We have been giving up money for ten years to keep the company in Peine-Vöhrum going. But now it’s over. Something must finally happen!” A works council, for those not familiar, functions as a complementary but independent body to formal trade unions. More recent articles relay the sentiment of employees who feel as if they are being treated like doormats. The manufacturing side of the business has also been further financially hindered due to prior commitments relating to the pensions of Pelikan’s retirees though there may be some relief on that front as the obligation has now been reduced to just half of the original burden. 

In a sign of potential escalation, Mr. Dettmer of the works council has called upon Hubertus Heil (SPD), Federal Minister of Labour and Social Affairs, to evaluate the situation for himself. A trip to the Peine-Vöhrum plant is reportedly scheduled for some time in mid-August. Also involved is Lower Saxony state parliament member Matthias Möhle (SPD) in a sign that political pressure may soon be brought to bear upon Pelikan. He has gone on record as sharing his concerns about the situation at the factory with the Minister President of Lower Saxony, Stephan Weil (SPD). In all fairness to Pelikan, plant manager Rainer Niermann does concede that the company has disappointed its employees and professes empathy for the protests. None the less, in defense of the company, he relates that the wages are being brought up to date and that no layoffs have been put forth. He goes so far as to insinuate that the crisis is coming to an end. Most of the statements from management have seemingly downplayed the current situation. Given the reported track record that the company has had with its employees, it’s hard for many to take those reassurances at face value. Certainly, these troubles at the plant give us perhaps our best indication to date as to some of the previously unspoken reasons behind the product delays that we have seen.

Hubertus Heil, Matthias Möhle, and Stephan Weil

Left to right: Federal Minister of Labour and Social Affairs Hubertus Heil, Lower Saxony parliament member Matthias Möhle, and Minister President of Lower Saxony Stephan Weil, all current members of the Social Democratic Party (SPD)

I only hope that Mr. Loo Hooi Keat and his team at Pelikan can pull it together and secure harmony amongst the divisions responsible for the production and sale of the company’s fine writing instruments. There are some positive developments that have recently been touted on that front. Pelikan International is operating in the black thanks to strong sales in the German market largely driven by a pivot to more digital strategies during the pandemic. Pelikan reported a before tax profit of around RM14.6 million (compared with RM20.3 million in 2019) for last year. The 28.1% reduction in profit largely comes from reduced turnover resulting in lower sales but the company forecast confidence in their future growth potential. Even in the face of lingering concerns over vaccinations and coronavirus, the company is projecting further profit anticipated on the back of strong school supply sales as children return to the class rooms. In an attempt to provide some reassurances to their workers, management peddled those numbers in company wide messaging which may not have had the intended effect. Rather than quell the unrest, the union is considering re-negotiation. With regards to the forfeiture of a percentage of their collective wages, Mr. Yüksel is reported to have said; “If Pelikan is now profitable, we will of course make this an issue in the next negotiations.” Where these ongoing tensions will lead and how they will impact the production, sale, and distribution of Pelikan’s fine writing instruments remains to be seen and The Perch will follow the story closely as it develops.

Pelikan International's stock performance

Pelikan International’s year to date performance on the Malaysian stock exchange for 2021 (click to enlarge)


References

18 responses

  1. Great reporting — thank you — balanced and as detailed as possible. Hopes and best wishes are with everyone suffering financial hardship because of this crisis and its related issues… there will be papers and books on this for decades to come!

    Liked by 1 person

    • The full ramifications of COVID fall out won’t be entirely realized for years to come. Hopefully our favorite businesses and their employees are able to make it through intact.

      Liked by 2 people

  2. Thank you for (as usual) a most thorough and perceptive article! I hope Pelikan’s management and staff representatives both read it and learn from it.
    Compared to the situation in other European countries, German companies tend to be better at getting management and workforce working together for their common benefit, avoiding the sort of confrontational ‘them against us’ confrontations one sees in British or French industrial relations.
    As an enthusiastic Pelikan collector, I can only hope this wonderful pen maker pulls through its present troubles. Looking at my large collection of Pelika pens and inks, I can reasonably claim to have made my own ‘contribution’ to the company’s fortunes… And would be only too delighted to continue doing so in the future 🙂

    Liked by 1 person

  3. Another well done article! We have fond memories of our visit to the factory a few years back. This situation doesn’t seem all that unique in our post-pandemic and global-trade upheaval environment. Still,given that it’s Pelikan, it hits home. Let’s hope improving economic events give them a little space to get things worked out and move forward. [Just got our bottle of Golden Beryl yesterday so Pelikan is front-of-mind!]

    Liked by 1 person

    • Glad that you enjoyed it. I thought of you and your trip as I wrote the piece. I have yet to get over there myself. Hopefully there will be a factory to visit when I’m able. I am optimistic that there will be.

      Liked by 1 person

  4. I have read this kind of stories before and it never came to a good end (for the workers). Pelikan may prove me wrong but I have not much hope for the company. Sad, very sad story!

    Like

  5. Fascinating. I hope the company can get its act together without further alienating its workers. This gives some insight into the recent price increases.

    One item in particular caught my eye:

    “The manufacturing side of the business has also been further financially hindered due to prior commitments relating to the pensions of Pelikan’s retirees though there may be some relief on that front as the obligation has now been reduced to just half of the original burden.”

    Does that mean they cut retiree pensions in half? As a retired person myself, that gave me a shudder. A company that does that is fundamentally untrustworthy.

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    • I believe the pensions are nothing nefarious. The obligation has gone down from 6 million to 3 million euros. They closed out in the early 1980s so I think that the reduction is just attrition of the surviving beneficiaries.

      Like

  6. The story has some familiar signposts, namely that a generally successful part of a larger enterprise suffers from lack of support and reinvestment, which, over time, won’t lead anyplace good.

    Let’s assume for a moment that the material supply problems are more to do with logistical issues rather than an inability to pay. When a firm is not paying regular wages on time it’s a serious red flag. Suppliers hear that and would be right to question the ability to meet long term payment obligations for their materials. It doesn’t necessarily take much for things to spiral in on themselves from there.

    One wonders if there isn’t, and hasn’t been for a while, sufficient liquidity to generate cash to handle these issues. None of this sounds good to me.

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    • I agree with your overall summation. Even if the company is in the black, that does no good for the Peine-Vöhrum location if they don’t re-invest some of that money into the facilities and its employees. The shortage in materials is one issue but the bigger issue is clearly not being able to meet the workers wages. It seems that their union is strong so hopefully there are good advocates and that the issues can be worked out. I certainly don’t think that we are past the point of no return but situations such as this can certainly escalate quickly. Many of the articles indicate a “blood letting” of the departments for a while now. Seems like management has tried to squeeze as much out as possible without giving anything back. Obviously, I’ll report any additional significant developments on the issue here when possible.

      Like

  7. Pelikan as a business has been a mess for decades. Post WWII the Stresemann was positioned as a mid-to high-end fine writing instrument line. Times were good then; the products were attractive, reliable, and still affordable. That has not been the case with Pelikan for decades now. One only needs to look at the eye-watering annual price increases to understand Pelikan as a company is a ship without a rudder. In the past two decades (give or take) there has been a resurgence of interest in quality writing instruments, fountain pens in particular. In my opinion, Pelikan has priced itself out of that market.

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    • I have to agree with you. My impression has also been that Pelikan is indeed pricing itself out of the market. They have a fine product but the ever rising prices and the large global discrepancy between prices is not a good look for them. Thankfully, there is a thriving vintage market.

      Like

  8. Pingback: Pelikan To Sell Its German Logistics Center « The Pelikan's Perch

  9. Pingback: The German Federal Minister For Labor And Social Affairs Visits Pelikan’s Vöhrum Factory « The Pelikan's Perch

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