Mondragon

Corporation

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The Mondragon Corporation is a

corporation and federation of worker
cooperatives based in the Basque region
of Spain. It was founded in the town of
Mondragon in 1956 by graduates of a
local technical college. Its first product
was paraffin heaters. It is the tenth-
largest Spanish company in terms of
asset turnover and the leading business
group in the Basque Country. At the end
of 2014, it employed 74,117 people in
257 companies and organizations in four
areas of activity: finance, industry, retail
and knowledge.[3] By 2015, 74,335 people
were employed.
Mondragon Co-operative Corporation

Type Worker cooperative

federation

Founded 1956

Founder José María

Arizmendiarrieta

Headquarters Mondragón, Basque

Country, Spain
Area served International
Key people Iñigo Ucín (president
of the General Council)

Revenue € 12.110 billion

(2015)[1]
Total assets € 24.725 billion
(2014)[2]
Number of employees 74,335 (2015)[3]

Divisions Finance, Industry,

Retail, Knowledge
Website mondragon-
corporation.com

Mondragon cooperatives operate in

accordance with the Statement on the
Co-operative Identity maintained by the
International Co-operative Alliance.

History
In 1941, a young Catholic priest, José
María Arizmendiarrieta settled in
Mondragón, a town with a population of
7,000 that had not yet recovered from the
poverty, hunger, exile, and tension of the
Spanish Civil War.[4] In 1943,
Arizmendiarrieta established a technical
college which became a training ground
for managers, engineers and skilled
labour for local companies, and primarily
for the co-operatives.[5] Arizmendiarrieta
spent a number of years educating young
people about a form of humanism based
on solidarity and participation, in
harmony with Catholic social teaching,
and the importance of acquiring the
necessary technical knowledge before
creating the first co-operative. In 1955, he
selected five young people to set up the
first company of the co-operative and
industrial beginning of the Mondragon
Corporation. The company was called
Talleres Ulgor, an acronym derived from
the surnames of Usatorre, Larrañaga,
Gorroñogoitia, Ormaechea, and Ortubay,
known today as "Fagor
Electrodomésticos".[6]

In the first 15 years many co-operatives

were established, thanks to the autarky
of the market and the awakening of the
Spanish economy. During these years,
also with the encouragement of Don
José María Arizmendiarrieta, the Caja
Laboral (1959) and the Social Welfare
Body Lagun Aro (1966) were set up that
were to play a key role. The first local
group was created, Ularco. In 1969,
Eroski was founded by merging ten small
local consumer co-operatives.[7]

During the next 20 years, from 1970 to

1990, the dynamic continued, with a
strong increase in new co-operatives
promoted by Caja Laboral’s Business
Division, the promotion of co-operative
associations, the formation of local
groups, and the founding of the Ikerlan
Research Centre in 1974.[8]

When Spain was scheduled to join the

European Economic Community in 1986,
it was decided in 1984 to set up the
"Mondragon Co-operative Group", the
forerunner to the current corporation. In-
service training for managers was
strengthened by creating Otalora,
dedicated to training and to
dissemination of co-operatives. The
Group consisted of 23,130 workers at the
end of 1990.[9]

On the international stage, the aim was

to respond to growing globalisation,
expanding abroad by setting up
production plants in a number of
countries. The first was the Copreci plant
in Mexico in 1990, followed by many
others: up to 73 by the end of 2008, and
122 at the end of 2013. The goals were
to increase competitiveness and market
share, bring component supply closer to
customers’ plants, especially in the
automotive and domestic appliance
sectors, and to strengthen employment
in the Basque Country by promoting
exports of co-operatives' products by
means of new platforms.[10]

In October 2009, the United Steelworkers

announced an agreement with
Mondragon to create worker
cooperatives in the United States.[11] On
March 26, 2012, the USW, Mondragon,
and the Ohio Employee Ownership Center
(OEOC) announced its detailed union co-
op model.[12]

The industry component ended 2012

with a new record €4 billion in
international sales, beating sales figures
from before the financial crisis of 2007-
2008. Mondragon opened 11 new
production subsidiaries. International
sales that year accounted for 69% of all
sales, a 26% increase from 2009 to 2012,
and with 14,000 employees abroad.
Mondragon’s share in the BRIC markets
increased to 20% compared to the
previous year.[13] In 2013, international
sales grew by 6.7% and accounted for
71.1% of total sales.[14]

On 16 October 2013, domestic appliance

company Fagor Electrodomésticos filed
for bankruptcy under Spanish law in
order to renegotiate €1,1 billion of debt,
after suffering heavy losses during the
eurocrisis and as a consequence of poor
financial management, putting 5,600
employees at risk of losing their jobs.[15]
This was followed by the bankruptcy of
the whole Fagor group on 6 November
2013.[16] In July 2014, Fagor was bought
by Catalan company Cata for €42.5
million. Cata pledged to create 705 direct
jobs in the Basque Country and to
continue the brand names Fagor, Edesa,
Aspes, and Splendid.[17]

Business culture

Iñigo Ucín, president of the General Council of

Mondragon Corporation
Mondragon co-operatives are united by a
humanist concept of business, a
philosophy of participation and solidarity,
and a shared business culture. The
culture is rooted in a shared mission and
a number of principles, corporate values
and business policies.[18]

Over the years, these links have been

embodied in a series of operating rules
approved on a majority basis by the Co-
operative Congresses, which regulate the
activity of the Governing Bodies of the
Corporation (Standing Committee,
General Council), the Grassroots Co-
operatives and the Divisions they belong
to, from the organisational, institutional
and economic points of view as well as
in terms of assets.[19]

This framework of business culture has

been structured based on a common
culture derived from the 10 Basic Co-
operative Principles, in which Mondragon
is rooted: Open Admission, Democratic
Organisation, the Sovereignty of Labour,
Instrumental and Subordinate Nature of
Capital, Participatory Management,
Payment Solidarity, Inter-cooperation,
Social Transformation, Universality and
Education.[20]

This philosophy is complemented by four

corporate values: Co-operation, acting as
owners and protagonists; Participation,
which takes shape as a commitment to
management; Social Responsibility, by
means of the distribution of wealth
based on solidarity; and Innovation,
focusing on constant renewal in all
areas.[21]

This business culture translates into

compliance with a number of Basic
Objectives (Customer Focus,
Development, Innovation, Profitability,
People in Co-operation and Involvement
in the Community) and General Policies
approved by the Co-operative Congress,
which are taken on board at all the
corporation’s organisational levels and
incorporated into the four-year strategic
plans and the annual business plans of
the individual co-operatives, divisions,
and the corporation as a whole.[22]

Wage regulation

At Mondragon, there are agreed-upon

wage ratios between executive work and
field or factory work which earns a
minimum wage. These ratios range from
3:1 to 9:1 in different cooperatives and
average 5:1. That is, the general manager
of an average Mondragon cooperative
earns no more than 5 times as much as
the theoretical minimum wage paid in
their cooperative. For most workers, this
ratio is smaller because there are few
Mondragon worker-owners that earn
minimum wages, because most jobs are
somewhat specialized and are classified
at higher wage levels. The wage ratio of a
cooperative is decided periodically by its
worker-owners through a democratic
vote.[23]

Compared to similar jobs at local

industries, Mondragon managers' wages
are considerably lower (as some
companies pay their best paid managers
hundreds of times more than the lowest-
paid employee of the company)[24] and
equivalent for middle management,
technical and professional levels. Lower
wage levels are on average 13% higher
than similar jobs at local businesses.
Spain's progressive tax rate further
reduces any disparity in pay.[23]

Business sectors
Mondragon Corporation operates in four
areas: finance, industry, retail, and
knowledge, with the latter distinguishing
Mondragon from other business groups.
In 2013, the corporation posted a total
revenue of over €12 billion (roughly $16
billion USD), and employed 74,061
workers,[3] making it Spain's fourth-
largest industrial and tenth-largest
financial group.[25]

Finance
This area includes the banking business
of Laboral Kutxa, the insurance company
Seguros Lagun Aro, and the Voluntary
Social Welfare Body Lagun Aro, which
had an asset fund totalling €5.566 million
at the end of 2014. The yield obtained
from this fund is used to cover long-term
retirement, widowhood, and invalidity
benefits, complementary to those offered
by the Spanish social security system.

Laboral Kutxa ended 2014 with €109.2

million in revenue in a year in which it
granted loans worth €14.4 billion, mainly
to households, small and medium-sized
enterprises to whom it can offer services
typical of large companies due to its
extensive experience with the
Corporation’s co-operatives.[26]

Industry

The corporation’s companies

manufacture consumer goods, capital
goods, industrial components, products
and systems for construction, and
services. The latter includes very diverse
business groups such as Abantail:
Adaptive design optimization, Alecop:
Engineering training, LKS Consultores:
Attorbeys etc, LKS Ingeniería: Architects
and engineers.MCCTelecom:
Telecommunication engineering.
Mondragon Lingua: Translation and
language schools, Mondragon Sistemas:
Automation, Industrial Computing and
Telecommunications.Ondoan: Turnkey
projects in the energy and environmental
sector. In the leisure and sports area, it
manufactures Orbea bicycles, exercise
equipment and items for camping,
garden and beach.[27]

In capital goods, Mondragon posted a

turnover of €976 million in 2009, and is
the leading Spanish manufacturer of
chip-removing (Danobat Group) and
sheet metal forming (Fagor Arrasate
Group) machine tools. These machines
are complemented by automation and
control products for machine tools,
packaging machinery, machinery for
automating assembly processes and
processing wood, forklift trucks, electric
transformers, integrated equipment for
the catering industry, cold stores, and
refrigeration equipment. Specifically
focusing on the automotive sector, the
corporation also manufactures a wide
variety of dies, molds and tooling for
casting iron and aluminium, and
occupies a leading position in machinery
for the casting sector.[28]

In Industrial Components, Mondragon

posted a turnover of €1.5 billion in 2009,
a sector in which it operates as an
integrated supplier for the leading car
manufacturers, offering from the design
and development of a part to the
industrialisation and supply of
components and assemblies. It has
different business units such as brakes,
axles, suspension, transmission, engines,
aluminium wheel rims, fluid conduction,
and other internal and external vehicle
components. It also produces
components for the main domestic
appliance manufacturers in three
business areas: white goods, home
comfort, and electronics. And it
manufactures flanges and pipe
accessories for processing oil-gas,
petrochemical plants and power
generation, copper and aluminium
electrical conductors, and components
for conveyors.[29]

In construction, sales totalled €974

million in 2009. Mondragon has
constructed buildings and important
infrastructure projects. It designs and
builds large metallic (URSSA), laminated
wood and prefabricated concrete
structures; supplies prefabricated parts
in polymer concrete; offers solutions for
formwork and structures (ULMA Group)
as well as public works machinery and
the industrialisation of the construction
process, including engineering and
assembly services. The ORONA Group
produces elevators.
In services to business, sales totalled
€248 million in 2008, including business
consultancy services, architecture and
engineering, property consulting, design
and innovation (LKS Group), systems
engineering for electromechanical
installations, and integrated logistics
engineering. It also offers a modern
language service, manufactures
educational equipment, and provides
graphic arts services (MccGraphics).

In 2013, 71.1% of turnover came from

international sales. Sales resulting from
the export of products abroad and
production generated in the 122
subsidiaries located in several different
countries: China (15), France (17), Poland
(8), Czech Republic (7), Mexico (8), Brazil
(5), Germany (4), Italy (4), United
Kingdom (3), Romania (3), United States
(4), Turkey (2), Portugal (2), Slovakia (2),
India (2), Thailand (1) and Morocco (1).
Overall, in 2013 these 122 plants
provided work for more than 11,000
people. The corporate industrial park in
Kunshan, close to Shanghai houses
seven subsidiaries.[30] In 2012, it opened
11 new subsidiaries abroad, employing
around 14,000 people. Its international
sales that year marked a record number
of 69% of its total sales (€5.8bn, with a
2% fall compared to the previous year).
Mondragon also participated in 91
international R&D projects.[31]

In 2014, the industrial cooperatives

created 1,000 jobs, and the
internationalisation continued with 125
production subsidiaries abroad - 3 more
than the year before.[32]

Retail

Mondragon runs Eroski, one of the

leading retail groups all over Spain and in
southern France, and maintains close
contacts with the French group Les
Mousquetaires and the German retailer
Edeka, with whom it set up the Alidis
international purchasing group in 2002.
The worker-owners and consumer-
members participate in the co-operative’s
decision-making bodies and
management of Eroski. At the end of
2013, Eroski posted a turnover of €6.6
billion, operating 2.069 stores made up
of 90 Eroski hypermarkets, 1,211
Eroski/center, Caprabo, Eroski/city,
Aliprox, Familia, Onda and Cash & Carry
supermarkets, 155 branches of Eroski
travel agencies, 63 petrol stations, 39
Forum Sport stores and 221 IF perfume
stores.[33] In southern France Eroski had
4 hypermarkets, 16 supermarkets and 17
petrol stations, and 4 perfume stores in
Andorra.[34]
Retail includes the food group Erkop, for
catering, cleaning, stock-breeding, and
horticulture with Auzo Lagun, a co-
operative in group catering and cleaning
of buildings and premises, and integrated
service in the health sector.[35] In 2008,
worker-members voted to expand the
cooperative transformation to the retail
group as a whole, turning subsidiaries
into co-operatives, and making salaried
workers worker-members. This process
was to be carried out over a number of
years.

Knowledge
This area has a dual focus: education-
training and innovation, which have both
been key elements in the development of
the Corporation. Training-education is
mainly linked to the dynamism of
Mondragon University, the significant role
that Politeknika Ikastegia Txorierri,
Arizmendi Ikastola and Lea Artibai
Ikastetxea play in their respective areas
and the activity of the Management and
Co-operative Development Centre
Otalora.

Mondragon University is a co-operative

university, which combines the
development of knowledge, skills, and
values, and maintains close relations
with business, especially Mondragon co-
operatives. Technological innovation is
generated through the co-operatives’ own
R&D departments, the Corporate Science
and Technology Plan, the corporation’s
12 technology centres and the Garaia
Innovation Park.[36]

The 15 technology centres play a

fundamental role in the development of
the sectors of focus. In 2009 they
employed 742 people and had a budget
of €53.7 million.[37] In 2013 its network of
technology centres and R&D units
provided employment for 1,700 people
and the commitment to R&D&I matters
amounted to 136 million Euros, 8.5% of
added value.[14] Mondragon has 479
families of Patents for Inventions, which
accounts for 25% patents in the Basque
Country, participating in more than 30
R&D cooperation projects at the
European level.[32]

Reactions
In 2012 Richard D. Wolff, American
professor of economics, hailed the
Mondragon set of enterprises, including
the good wages it provides for
employees, the empowerment of
ordinary workers in decision making, and
the measure of equality for female
workers, as a major success and cited it
as a working model of an alternative to
the capitalist mode of production.[38]

In an April 2012 interview Noam

Chomsky said that while Mondragon
offers an alternative to capitalism, it was
still embedded in a capitalist system
which limits Mondragon's decisions:[39]
“ Take the most advanced case:
Mondragon. It’s worker owned, it’s
not worker managed, although the
management does come from the
workforce often, but it’s in a
market system and they still
exploit workers in South America,
and they do things that are harmful
to the society as a whole and they
have no choice. If you’re in a
system where you must make
profit in order to survive, you're
compelled to ignore negative
externalities, effects on others. ”
Vincent Navarro wrote that from a
business perspective, Mondragon is
successful in matching efficiency with
solidarity and democracy. However, he
writes that the number of employees who
are not owners have increased more
rapidly than worker-owners, to a point
that in some companies, for example in
the supermarket chains owned by
Mondragon, the first are a much larger
group than the second. In Navarro's view,
this establishes a two-tier system - for
example, in terms of whom to save in the
case the company collapses. In the
collapse of Fagor, the relocation of
employees to other companies belonging
to Mondragon favored those who were
worker-owners, which may affect labor
relations:[24]
“ Actually, one of the successes of
Mondragon was its ability to create
a sense of identity among the
workers within the company,
encouraging an environment of
solidarity and collegiality among
them, a feeling that also extended
(although to a much lesser degree)
to non-worker-owners. The
connection felt by the latter group
has somewhat weakened,
however, exposing a vulnerable
point for the cooperative. ”
The Mondragon system is one of four
case studies analyzed in Capital and the
Debt Trap, which summarized evidence
claiming that cooperatives tend to last
longer and are less susceptible to
perverse incentives and other problems
of organizational governance than more
traditionally managed organizations.

Mondragón in fiction
In 2312, a science fiction novel by Kim
Stanley Robinson, the Mondragón
Corporation has evolved into a planned
economy system called the Mondragon
Accord.[40] The Mondragon Accord is
controlled by means of a network of AI's
running on quantum computers, and rules
large parts of the Solar System, including
Mercury and most of the moons of the
gas giants; only part of Earth, and its
colonies in space, retain remnants of
capitalist economies, while Mars has
withdrawn from the Accord in the century
preceding the story. The Mondragón
Corporation already appeared in
Robinson's earlier Mars trilogy, as one of
the Terran groups involved in the
colonization and terraforming of Mars;
the coop is also portrayed as the
inspiration of both the bogdanovist
movement[41] and the libertarian-leaning
Praxis Corporation[42] two of the main
forces leading the revolution for the
independence of Mars.

See also
 Basque Cooperative Movement
Cecosesola, association of
cooperatives in Venezuela
Distributism
Horizontalidad
John Lewis Partnership
List of worker cooperatives
Workers' self-management

References
1. "Annual Report 2015" . Mondragon
Corporation. Archived from the original
on 14 June 2016. Retrieved 7 June 2016.
2. "Annual Report 2014" (PDF).
Mondragon Corporation. Retrieved
13 February 2016.
3. Mondragon Corporation. "Annual
Report 2012" . Archived from the original
on 21 September 2013. Retrieved
21 September 2013.
4. The Mondragón Experiment - Corporate
Cooperativism (1980) FULL You Tube
5. Molina, Fernando (2005). José María
Arizmendiarreta. Caja Laboral. ISBN 84-
920246-2-3.
6. Foote, William (1991). Making
Mondragón. IRL Press. ISBN 0-87546-182-
4.
7. Conosce Eroski una empresa diferente
Eroski
8.
http://www.euskomedia.org/aunamendi/7
6338 euskomedia.org
9. Staff writer(s). "Year-on-year
Development, MONDRAGON
Corporation" . www.mondragon-
corporation.com. Archived from the
original on 2011-12-31.
10. Ormaetxe, Jose Maria (2003). Medio
siglo de la experiencia cooperativa de
Mondragon. Azatza. SS-1433/2003.
11. Wilson, Amanda. Bendable Business:
Cooperatives less likely to break in
economic crises. The Dominion. 4
December 2009.
12. The-Union-Co-op-Model United
Steelworkers, March 26 2012
13. Internationalisation consolidates
MONDRAGON’s industrial business with
sales abroad in excess of €4bn Jun 17,
2013 tulankide.com
14. Internationalisation and innovation,
keys to the evolution of MONDRAGON
cooperatives in 2013 Archived 10
September 2014 at the Wayback Machine
8 September 2014, mondragon-
corporation.com
15. Spanish white goods company Fagor
seeks protection from creditors Oct 16,
2013 reuters.com/
16. Fagor et sa filiale française déposent
le bilan Le Monde.fr, AFP and Reuters, 6
November 2013
17. Catalan company Cata buys bankrupt
domestic appliance business Fagor 29
July 2014 catalan news agency
Intracatalònia, SA
18. Larrañaga, Jesus (1998). El
cooperativismo en Mondragon. Azatza.
ISBN 84-88125-12-7.
19. "Mondragon Corporation" . Archived
from the original on 24 October 2010.
Retrieved 11 November 2010.
20. "Mondragon Corporation. Co-operative
Culture" . Archived from the original on
25 November 2010. Retrieved
11 November 2010.
21. Foote, William (1991). Making
Mondragon. ILR. ISBN 0-87546-182-4.
22. "Mondragon Corporation. Co-
operatives bodies and terminology" .
Archived from the original on 24 October
2010. Retrieved 11 November 2010.
23. Herrera, David (2004). "Mondragon: a
for-profit organization that embodies
Catholic social thought" (PDF). Review of
Business. The Peter J. Tobin College of
Business, St. John's University. 25 (1):
56–68. Archived from the original (PDF)
on 2010-07-14. Retrieved August 29,
2014.
24. Vincent Navarro, What About
Cooperatives as a Solution? The Case of
Mondragon , CounterPunch, 2014.04.30
25. Jeffrey Hollender (June 27, 2011).
"The Rise Of Shared Ownership And The
Fall Of Business As Usual" . Fast
Company. Retrieved 2011-06-28.
26. LABORAL KUTXA OBTUVO EN 2014
UN BENEFICIO CONSOLIDADO DE 109,2
MILLONES DE EUROS 19 february 2015
27. / Organisational Estructure in
Mondragon, consumer goods
28. / Organisational estructure in
Mondragon, capital goods
29. / Organisational Estructure in
Mondragon, industrial components
30. "/ Corporative Profile 2010" . Archived
from the original on 2 March 2011.
Retrieved 11 March 2011.
31. Tu Lankide,"Internationalisation
consolidates Mondragon’s industrial
business with sales abroad in excess of
€4bn" , 17 June 2013.
32. Tu Lankide MONDRAGON
cooperatives in industrial sector create
1.000 jobs in 2014 July 14, 2015
33. Datos destacados de 2014 Eroski
34. "/ Magnitudes económicas de
Eroski" . Archived from the original on 19
March 2011. Retrieved 11 March 2011.
35. "Erkop" . Erkop.
36. "Mondragon Annual Corporate Profile
for 2010" . Archived from the original on
2 March 2011. Retrieved 11 March 2011.
37. "/ Mondragon Yearly Report 2010" .
Archived from the original on 15 April
2011. Retrieved 11 March 2011.
38. Wolff, Richard (24 June 2012). Yes,
there is an alternative to capitalism:
Mondragon shows the way . The
Guardian.
39. Talking With Chomsky , Laura
Flanders, 30 April 2012 CounterPunch.
40.
http://kimstanleyrobinson.info/node/445
41.
http://kimstanleyrobinson.info/content/m
ars-trilogy-groups
42.
https://claecceity.wordpress.com/2015/0
3/04/a-rebuke-by-vlad-taneev-from-kim-
stanley-robinsons-blue-mars/

Further reading
Azurmendi, Joxe 1984: El hombre
cooperativo
Spanish white goods company Fagor
seeks protection from creditors
(October 2013)
Thousands of Fagor employees
demand in Mondragon town to keep
their jobs (October 2013)
White-goods giant Fagor goes into
administration (October 2013)
Cooperation for Economic Success.
The Mondragon Case (2011) in Analyse
& Kritik, 33 (1), 157-170 . Ramon Flecha
& Iñaqui Santa
Cruz.http://www.analyse-und-
kritik.net/en/abstracts_current.php#56
2
Making Mondragon: The Growth and
Dynamics of the Worker Cooperative
Complex (1991), William Whyte.
ISBN 0-87546-182-4
We Build the Road as We Travel:
Mondragon, A Cooperative Social
System, Roy Morrison. ISBN 0-86571-
173-9
The Mondragon Cooperative Experience
(1993), J. Ormachea.
Cooperation at Work: The Mondragon
Experience (1983), K. Bradely & A.
Gelb.
Values at Work: Employees
participation meets market pressure at
Mondragon (1999), G. Cheney.
Mondragon: An economic analysis
(1982), C. Logan & H. Thomas.
The Myth of Mondragon: Cooperatives,
Politics, and Working-Class Life in a
Basque Town (1996), by Sharryn
Kasmir, State University of New York
Press.
From Mondragon to America:
Experiments in Community Economic
Development (1997), by G. MacLeod,
University College of Cape Breton
Press. ISBN 0-920336-53-1
"Jobs of Our Own: Building a
Stakeholder Society" (1999), by Race
Mathews, Pluto Press (Australia) and
Comerford & Miller (London). ISBN 1-
86403-064-X. US reprint 2009, The
Distributist Review Press. ISBN 978-0-
9679707-9-0. ISBN 0-9679707-9-2.
"Rag Radio: Carl Davidson on
Mondragon and Workers'
Cooperatives," The Rag Blog,
September 15, 2011 Interview by
Thorne Dreyer (44:05)
Articles about the Mondragon
Corporation on The Rag Blog
External links
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El PNV asegura que Fagor y
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destiempo EL CORREO Newspaper
MONDRAGON Corporation - Google
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CEPES MCC is member of the
Spanish National Confederation of
social economy Enterprises.
 Mondragón: The Remarkable
Achievement article from In Context
magazine, 1983

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