COMMENT: A dead-end street

COMMENT
Franz W. Rother is Editor-in-Chief of Automobilwoche

Back in the early 1980s IG Metal's concept to fight growing unemployment was simple. If there is not enough work for everyone, then the work available needs to be distributed to more people. After fierce arguments, the negotiating parties agreed on the 35-hour week in 1984.

The German path led to a leisure-oriented society -- and, as we now know, this led the country into a dead end.

Abroad, the current discussion over working hours in Germany meets with laughter and derision. Robert Lutz for example, second in command at General Motors, compared the situation to putting a car on triangular wheels to save the brakes -- an allusion to an episode of the cartoon series "The Flintstones".

Lutz knows how serious the subject is. When Automobilwoche wrote recently that, as part of tariff negotiations, Opel was considering a plan to increase working hours to 38 from 35 hours a week at its Bochum plant, employees were appalled and threatened to go on strike.

Not even labor unions now deny that, with strong global competition for investment, Germany's high labor costs are a big disadvantage of Germany as a plant location.

The result can be seen everywhere within the automobile industry. Almost every week a supplier announces it is moving production capacity from Germany to low-wage countries in Eastern Europe or Asia. One reason is price pressure from original equipment manufacturers (OEMs).

But OEMs currently also invest a lot abroad. It is easy to imagine where this will lead. The number of employees within the German auto industry will continue to fall in coming years. Globalization stands not only for open markets but also for free competition between locations.

The German auto industry can only compete successfully if it continues to increase productivity and reduces labor costs further.

Asian manufacturers now also know how to build attractive cars. And recent market research showed again that the quality of imported vehicles from the Far East is sublime.

It is clear, however, that unpaid overtime alone will not solve Germany's problems. Especially not in view of the current economic situation.

Due to low domestic demand and a correspondingly low capacity use, Volkswagen is currently extending the summer break for thousands of its employees.

And if Ford had not reduced its capacity in Europe, it would also need to consider short-time work.

For the time being, unpaid overtime helps to improve companies' balance sheets and, therefore, increases shareholder value. However, this does not necessarily mean that companies' competitiveness also goes up.

One just needs to look over the border to Britain. Employees within the automotive industry there work 200 hours a year more than their German colleagues. However, their productivity is 20 percent lower, never mind the quality.

This is why car companies and unions should demonstrate sound judgment in their negotiations.

Those who envy Eastern Europe for its low labor costs and try to put their employees under pressure by threatening to move production abroad are taking the wrong path. It is a path that will lead to a dead end.

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