Fagor, one Mondragon’s core co-ops is heading for bankruptcy. Fagor did produce home appliances, but ceased production three weeks ago. Mondragon is both horizontally and vertically organized meaning the 110 co-ops within Mondragon support each other through interlocking arrangements including bailouts if needed. However, Mondragon cannot meet Fagor’s debt of 1.2 billion dollars or come up with the 200 million dollars life line proposed by Fagor to their fellow co-ops in Mondragon. Where does this leave Mondragon? Because of the interlocking nature (solidarity) of Mondragon it could bring down the entire organization. Mondragon can’t meet the cost of the solidarity commitments made to Fagor by the organization. The workers, besides losing their jobs will lose all their equity in the business. If will be interesting to watch this unfold. Hopefully, there will be a creative solution.
Now lets go to the UK where the Cooperative Banks are on the verge of collapse. The Coop Banks are swimming in bad debts. The UK co-op movement at the moment can’t come with the cash to bail out the system. The bank managers want to convert the Banks to a private model of outside investors and American hedge funds. Can you believe this!!
The lesson to be learned from this mess; co-ops are not outside the market economy and they can make horrible mistakes. Now is the time to reflect on Mondragon and the UK cooperative banks and seek a solution.
The following is a link to the Economist article on this situation.
peace, bob davis