Volkswagen presents plan for 5,000 new jobs

In late 1999, personnel management at Volkswagen AG presented a new plan for the creation of 5,000 new jobs. In a pilot project at two production sites in Lower-Saxony, new van models are to be produced with a new system of work organisation. The central themes of this new project are teamwork and performance-linked working time, and a fixed monthly pay of DEM 5,000. On the whole, the IG Metall trade union and the Volkswagen works council welcomed the proposal and the possibility of creating additional jobs. At the same time, however, they fear that the plan might undermine the existing company agreement.

On 11 November 1999, Peter Hartz, head of the personnel management department at Volkswagen AG (VW AG) presented a new plan for the creation of 5,000 new jobs at VW, with the employees concerned receiving monthly pay of DEM 5,000. He stated that with this plan, abbreviated as "5,000 x 5,000", the management aims to strengthen the international competitiveness of the German motor manufacturing company by introducing a new form of production process, combined with new working patterns and fixed pay.

New model of production

VW is planning to start a pilot project from 2001 at two production sites in Lower-Saxony, bringing an additional 3,500 jobs to the Wolfsburg plant and 1,500 to the Hannover plant. These new employees will produce a new wide-bodied multi-purpose van (A-MPV) at Wolfsburg and camper vans in Hannover. For the present, the project is to be restricted to a three-year duration.

Under the plan, the new employees are to work over six days, with the exception of Sundays, within the legal framework. Employees will receive monthly pay of DEM 4,500 (plus employers' social security contributions), with a monthly bonus of DEM 500 to be paid half-yearly. In addition, there will be performance-linked extra payments. The aim is that the new model must be ready to go into production on time, and that 1,000 vans per day will subsequently be produced. Teamworking and "lean management" are of major importance in the new production plan. If the team is able to produce a specific number of vans of a specific quality in only 28.8 hours in a week they can stop working. If they do not fulfil this target, they are obliged to keep on working as long as necessary to reach the production target (up to a weekly maximum of 48 hours). In short, the better organised the teams of employees are, the lower their working time. An additional agreement covering general conditions is to be concluded to cover this model of production and its linked payments for three years. The essence of the agreement will be the commitment of employees to the whole programme and its flexible working times.

According to management, the whole concept is embedded in a strategy of retaining and further developing about 50% of all jobs within the whole VW concern in Germany. It is argued that this strategy requires competitive jobs with a higher level of flexibility. These statements have to be seen in a broader context: originally the new van was to have been produced in Portugal, where wage costs are only a quarter of the German norm, or in Slovakia, with wage costs only a 10th of the German level.

A danger to existing agreements?

Although the management emphasised that its initiative does not conflict with the VW company agreement, the IG Metall metalworkers' union and the VW works council stated that there will in future be two groups of employees with two different collective agreements in the same factory.

The company agreement for VW provides for weekly working time of 28.8 hours with an average pay of about DEM 5,000 - about the same as under the new project - while the new plan does not regulate working time at all beyond the legal maximum of 48 hours per week. Therefore extra payments for overtime work, shiftwork and work on Saturdays, as laid down in the company agreement, will not exist for employees working under the conditions of the new project. The proposal, while being praised as a contribution to the competitiveness of the German motor manufacturing industry and a guarantee for new jobs in Germany, is therefore also seen as involving the danger that it may be abused in order to avoid the collective agreement, and may endanger the whole system of collective bargaining in future debates.

It seems that IG Metall and the works council do not really have the option of acting against the new scheme if they do not want to lose the opportunity for new jobs. Given this high degree of pressure, it is not surprising that they have not completely refused the proposal, though their acquiescence should not be exaggerated, as there have been no talks yet. First reactions indicate that the management proposal is seen as offering more opportunities than risks. On 3 March 2000, Hartmut Meine, head of the IG Metall Hannover region, stated that, overall, unions assess the plan positively. The key problem, in the union's view, is the possible extension of weekly working time up to 48 hours. Mr Meine said that "IG Metall will not accept a 48-hour week." Arguing that employees have an interest in regular working time, IG Metall will insist on collectively agreed working hours in forthcoming talks on this subject.

Klaus Volkert, head of the company works council, takes a similar position. He emphasises that the offer of 5,000 new jobs cannot be refused by the works council, but that the concrete shape of the production model needs further discussion. He made clear that the existing company agreement for the present 100,000 VW employees will not be brought into question in this debate.

Commentary

VW has had a reputation for presenting surprising ideas since the innovative introduction of the 28.8-hour week at the beginning of the 1990s in order to save jobs at the company. This reduction of working time was followed by an "agreement between generations" (Generationenvertrag) providing for older employees to retire early when younger colleagues are ready to switch between different factories to meet personnel needs. The third innovation was the "time-securities" (Zeit-Wertpapiere) scheme, whereby employees can save overtime hours or annual bonuses to raise their income in the event of early retirement. With its new proposal, the company is again causing quite a stir, not only within the motor manufacturing industry but also with regard to the discussion on the alleged lack of flexibility of working arrangements in Germany and the rigidity of collective agreements and legal regulations. VW's aim of creating new jobs with a high income in Germany deserves credit, but it is arguably extorting new conditions for these jobs from unions and works councils by threatening them with producing the new cars in countries with lower wages than Germany if they do not agree. IG Metall and the works council, on the other hand, seem to lack the will to start a conflict with the management. It is hardly understandable that they do not even attempt a strategy to safeguard the validity of the existing agreement also for the new employees. (Alexandra Scheele, Institute for Economic and Social Research, WSI)