Unions are concerned that other companies will try to emulate Northern Electric and make thousands of workers redundant on statutory severance terms.
More than 1,800 workers belonging to four unions at Northern Electric are to be balloted next month on strike action which could mean power cuts in the North-east of England over Christmas and the New Year.
Unions are accusing the company of seeking to maintain the high level of dividends repatriated to the US by shedding 500 staff. In the year to March 1998 the company made about pounds 100m gross profit - reduced to a deficit of pounds 30m after tax - but paid out more than pounds 200m in dividends.
In the nine months to September 1998 about pounds 77m was repatriated to America despite a pre-tax profit of just pounds 51m.
Northern Electric's decision to shed staff follows a call by the industry's regulator for distribution costs to be cut by 25 to 30 per cent. The regulator has also registered his opinion that dividends to shareholders should be kept at modest levels because the industry represents a low-risk investment.
Union leaders believe the company wants politicians to put pressure on the regulator to change his mind.
The company's business covers the constituencies of Tony Blair, Mo Mowlam and Peter Mandelson. Employees' representatives argue that the company does not fully understand the independent status of the regulator.
Tony Cooper, general secretary of the Engineers and Managers Association, whose members have never taken serious industrial action, said yesterday that staff would disrupt distribution unless the company changed its mind.
"Northern Electric has jumped the gun. Companies can negotiate with the regulator over his proposals and they could be referred to the Competition Commission. Apart from that, it is envisaged that the least efficient companies catch up with their more efficient peers in seven years, not one."
He said the industry had already shed one-third to half of its workforce since privatisation and could not handle more cuts.
Mr Cooper, a member of the Government's energy advisory panel, said the company was treating loyal staff in a "highly uncivilised" fashion. "We are not prepared to see our people used as cannon fodder in a battle between Northern Electric and the regulator. We will do our damnedest to find a negotiated settlement."
A company spokesman said management was disappointed by the unions' decision to hold a strike ballot. Northern Electric was committed to negotiating with employees' representatives during the 90-day legal consultation period.
Management was looking for alternatives to redundancies and welcomed union involvement. Both the company and unions believed the regulator was asking for too much.Reuse content