- Observatory: EMCC
- Published on: 02 March 2008
Disclaimer: This information is made available as a service to the public but has not been edited or approved by the European Foundation for the Improvement of Living and Working Conditions. The content is the responsibility of the authors.
Germany is the leading exporting economy. The number of German companies acquiring foreign companies exceeds the number of acquisitions in Germany. German government is in favour of a liberal market and does not intervene to reduce the extent of relocation or the number of acquisitions in Germany. Employers associations say that wage levels and regulations make companies shun the German location, whereas trade unions stress that companies threaten to relocate to press for concessions and demand further regulation of globalisation. The threat of relocation has been changing industrial relations. Surveys on public opinion of globalisation do not differentiate between the charactistics of the respondents or various forms of globalisation. The findings are contradictory.
Institutional responses to globalisation
Government action to prevent or reduce the extent of off shoring/relocation
Are there any recent examples in your country (i.e. over the past 3-4 years) of the government intervening to prevent particular activities from being relocated abroad or to reduce the scale of this?
If so, please give summary details and indicate the activities concerned
German government promotes international activities of companies and does not intervene to prevent relocation.
Social partner attitudes towards off-shoring/relocation
Have there been cases over the past 3-4 years where the possibility – or threat – of relocation of production has featured as a factor in collective bargaining?
If so, please indicate the cases concerned, how the possibility has been used and whether its use has become a more frequent occurrence.
A study by Ahlers, Oez and Ziegler (2007) based on the 2005 WSI Works Council Survey shows that there is a marked discrepancy across all sectors between threatened and effected relocation. More than 2,000 works councils across all economic sectors and company sizes were surveyed. Of more than 2,000 surveyed companies about 16% conducted relocation talks, with only 9% implementing a change of location (either within Germany or abroad). In the case of companies of more than 500 employees, about half of the businesses which had contemplated relocation, actually effected relocations. In small and medium sized companies there was hardly any discreprancy between relocation talks and effected relocation. Relocation talks increases pressures on the works council in the areas of safeguarding jobs, overtime and extension of working time, salaries and wages.
The threat of relocation features as a factor in collective bargaining in various ways:
According to the 2005 WSI Works Council Survey three out of four establishments make use of ‘opening-clauses’. ‘Opening clauses’ have become a common feature of collective agreements concluded between trade unions and employers associations. For example, in the German textile and garment sector works council and management may conclude company-level agreements without the consent of the trade union (IG Metall) and the employers association if management guarantees not to shed jobs for a certain period of time (opening clause since of 1996). The collective agreement of the chemical industry contains an opening clause on wages “to saveguard jobs and to improve the competitiveness of Germany as a location”, which allows company-level agreements to reduce wages by up to 10% (with consent of trade unions and employer association, since of 1998).
An increasing number of company-level agreements on competitiveness and employment protection (Standortsicherungsvereinbarungen, Beschäftigungssicherungsvereinbarungen) concluded between the trade union, the works council and company management represent an important element of general changes of labour relations. Concessions of the company, such as no enforced redunduncies over a certain period of time, product and investment allocation and a social plan, demand for wage and working time concessions on part of the employees.
According to a study by U. Jürgens and M: Krzywdzinski (2006) on company-level agreements in the German automobile industry between 1993 and 2006, the wage and working time concessions of the employees become immediately effective, the promises of the companies are directed to the future and depend on product markets whose development cannot be foreseen. Secondly, employment was reduced despite the existence of company-level agreements on employment protection. The agreements result in a concession competition between companies.
On 24. April 2007 the Federal Labour Court (Bundesarbeitsgericht, BAG) confirmed the trade unions’ right to call for strike action aiming for a social plan in case of restructuring.
Are there any cases over the past 3-4 years where trade unions have successfully resisted plans to relocate production abroad or have managed to reduce the extent of this?
Yes, the German Metalworkers’ Union (Industriegewerkschaft Metall, IG Metall) refers to the General Motors case and the successes of networking works councils and trade unions on a European scale.
Company level agreements preventing plant closure or reducing the extent of job losses for a certain period of time are typically considered successes by all trade unions. In December 2006 IG Metall, Fujitsu Siemens Computers (FSC) and the works council settled an agreement which covers ten plants run by various establishments. FSC guarantees to keep the ten German locations till 2012, to invest 30 million Euro yearly and to provide eight additional apprenticeship training positions per location in the years 2008 and 2010. Additionally, the company guarantees that the respective establishments will stay affiliated to the employer association. Working time will be extended to 38.5 hours, wage increases settled by the trade union and the employer association will be delayed for six months and the introduction of the new framework agreement on pay structures (ERA) will be postponed till 2010.
If so, please indicate the cases concerned and outline their main features Are there any cases where trade unions have accepted the need for the relocation of production – or part of it – abroad as a means of maintaining or improving the viability of companies and so of preserving some jobs and even ultimately expanding them?
If so, please briefly describe the cases concerned
According to trade union information, relocation of production leading to plant closures is not accepted by the trade unions neither is relocation that will lead to any substantial job cuts. In exceptional cases, relocation within a given cross-border company structure may be accepted or relocation (outsourcing) of particular services or service divisions (call center, IT) if a lowering of overhead costs seems plausible (to the employee representative on the supervisory board or to the works council). Trade unions are in support of FDI and globalisation strategies to open up new markets in case these strategies do not lead to job losses and the termination of production.
Government policy on foreign-owned firms controlling significant sections of the economy
Does the Government in your country have an explicit policy on restricting the acquisition of domestic companies in certain sectors by foreign-owned firms?
If so, please give summary details and indicate which sectors this applies to as well as whether any distinction is made between companies according to their nationality (e.g. whether non-European companies are treated differently from European ones)
No explicit policy. Since of 2002, the number of German companies taking over companies abroad exceeds the number of takeovers of German companies.
In respect to the implementation of the EU Commission’s Directive on takeover bids, the 2006 German law on takeover bids preserved some regulations of the previous German ruling, such as the information right of the works councils.
Are there any restrictions on foreign-owned companies setting up branches or subsidiaries in your country either generally or in specific sectors?
Please indicate the sectors concerned and the stated reasons for the restrictions. Please also indicate whether the restriction apply to companies from other parts of the EU as well as from outside
According to information by a government-related agency, there are some immigration law procedures for foreign entrepreneuers and employees, but in general, German law does not distinguish between foreign-owned and domestic ("German") companies. Very few restrictive regulations merely exist in special sectors relating to laws on war weapons and aviation. Considerations of security policy may have played a role, but generally a comment on the reasons for these restrictions is not possible.
Are there any sectors of the economy in which the acquisition of a domestic company has not been allowed over the past 3-4 years?
If so, please indicate the sectors concerned and the nationality of the foreign companies involved as well as the reasons given for the decision
There are no data available.
Social partner responses to the take-over of domestic firms by foreign-owned ones
Have there been any recent cases (i.e. over the past 3-4 years) where trade unions have resisted foreign acquisition of domestic companies explicitly because of the nationality of the company concerned?
If so, please give summary details, indicating whether there is any evidence of different attitudes being shown towards European firms as opposed to companies from outside Europe
Have t Resistance to foreign acquisitions explicitly because of the particular nationality of the company concerned is rather exceptional. In 2004, the IGBCE rejected the take over bid of German-French Aventis pharmaceutical group by Sanofi Synthélabo expecting relocation of jobs and research and development capacaties to France.
In the Arcelor/Mittal case, Arcelor works councils rejected the take over by Mittal Steel, whereas IG Metall announced that its position depends on the foreign company’s strategic plans, on the job perspectives it has to offer and on whether it guarantees co-determination.
The media division of the United Services Union (Vereinte Dienstleistungsgewerkschaft, ver.di) opposed media acquisitions by the Murdoch and the Berlusconi group, but explicitly stated that the reaction is directed against particular managerial strategies and is independent of the nationality of the investors.
Recently, the managerial strategies of private equity funds have drawn much criticism. In this case, the aspect that these are ‘foreign’ companies has sometimes been stressed.
Have there been any recent cases (i.e. over the past 3-4 years) where domestic companies have resisted acquisition by a foreign-owned firm on the grounds of its nationality?
If so, please give summary details, indicating the nationality of the company concerned and whether there is any evidence of European and non-European companies being regarded differently in this regard.
In 2004, Aventis resisted the take over by Sanofi Synthélabo while negotiating with Swiss Novartis. Management was supported by the government of Hessia and the IGBCE.
Attitudes to globalisation
Have employers’ associations in your country adopted a stated position as regards the main aspects of globalisation – i.e. outsourcing or the relocation of production abroad and the acquisition of domestic companies by foreign-owned ones?
If so, please give summary details, indicating whether or not the position varies across sectors of the economy
In response to the question above, the Confederation of German Employers’ Associations (Bundesvereinigung der Deutschen Arbeitgeberverbände, BDA) refers to a 2005 BDA statement on the the effects of globalisation on the Germany economy
According to BDA (2005), German companies are the more likely to keep the dominant part of jobs in Germany the more they make use of relocation, the international division of labour and of mixed calculation. In face of Germany’s wage levels companies have to rely on global supply chains for achieving high export rates. In 1991 to 2000, employment increased in those sectors which profited the most from globalisation, such as car manufacturing, the metall sector and the plastic sector.
Though Germany is the second most active European market for private equity fonds, 2004 figures show that foreign-owned equity capital is inclined to avoid investing in Germany, according to BDA. Public and political debates on the managerial strategies of international private equity funds pose a risk to the German financial market.
Have trade unions in your country adopted a stated position as regards the main aspects of globalisation – i.e. outsourcing or the relocation of production abroad and the acquisition of domestic companies by foreign-owned ones?
If so, please give summary details, indicating whether or not the position varies across sectors of the economy
*A Eurobarometer survey on globalisation was carried out in 2003 in the EU-15 Member States. This might serve as a useful point of reference for the countries concerned, to see, for example, whether or not national attitudes expressed in the survey are in line with similar surveys which have been conducted nationally. The survey findings are available at:
German Federation of Trade Unions (Deutscher Gewerkschaftsbund, DGB): The prevailing model of globalisation exerts pressure on workers’ rights and working conditions. DGB demands an unambivalent subordination of market freedoms and trade liberalisation to international law in the form of the UN human rights conventions and the ILO’s core labour standards. A new regulatory framework is needed to resist pressures from the global financial markets. Collective bargaining has to be europeanised to oppose the wage competititon imposed on workers by relocation. DGB demands the creation of a European rating agency assessing investments in terms of their social compatibility and sustainability. A stronger supervision of acquisitions and mergers is needed on the European level.
IG Metall on relocation: Rejects a ‘nationalistic-protectionist approach’, developing countries need access to European markets, workers’ rights have be strengthened. IG Metall does not oppose foreign direct investments, but IG Metall criticizes relocation measures which lead to job cuts and the termination of production in Germany. In 2006, chair Jürgen Peters launched an initiative to debate political measures to compensate workers, local and regional labour markets for job losses and other disadvantages due to relocation. Peters asked the German government and the EU Commission to consider introducing a duty or fee to be paid by companies which relocate for profit reasons only. Co-determination rights and employees’ seats on the supervisory boards should be internationalised.
United Services Union (Vereinte Dienstleistungsgewerkschaft, Ver.di): Stresses that the extent of relocation and FDI is exaggerated to press for concessions and changes of legislation. Germany profits from the international division of labour. Relocation has become a problem because of German economic policy not being able to compensate the job losses. Ver.di demands a fundamental change of economic policy to spur domestic demand. Ver.di is in line with DGB demanding European policy to strengthen collective bargaining and workers’ rights.
Mining, Chemicals and Energy Industrial Union (Industriegewerkschaft Bergbau, Chemie, Energie, IGBCE): Demands that trade unions are actively involved in German and European policy making shaping and regulating the model of globalisation. Germany profits from globalisation, to react to challenges of globalisation the ‘modell Germany’ and the system of industrial relations has to be strengthened. EU Commission has to take a clear stand in favour of Europe as a location of industries. The competitiveness of companies has to be strengthened by improving education and training, research and development. To prevent the relocation of jobs trade defence instruments are needed to protect the competitiveness of (European) companies.
No statement on relocation or acquisitions by the Christian Trade Union Federation of Germany (Christlicher Gewerkschaftsbund, CGB).
Have there been any surveys of public opinion in your country over the past 3-4 years on attitudes towards globalisation or on the various dimensions of this (as listed above)?
If so, please summarise the main findings of these. Please give a breakdown, where possible, in terms of the characteristics of respondents (e.g. by sex, age, socio-economic group, education level, occupation, sector of employment or region).
1. The German data of Eurobaromater 66 on the perception of globalisation were published by the Centre of political research (Centrum für angewandte Politikforschung, C.A.M.) at University of Munich and by the Bertelsmann research group on politics (Bertelsmann Forschungsgruppe Politik). Please note that the figures differ from those published by the EU Commission’s Representation in Germany (Eurobarometer 66. National Report on Germany, 2006).In the following , we list both the Eurobarometer 66 German data according to C.A.M. and to the National report. The discrepancy could not be clarified.
39% of the German respondents see globalisation as an opportunity for companies to open up new markets, according to the data as published by C.A.M. (National report: 41%)
59% of German respondents say globalisation poses a danger to companies and jobs according to C.A.M. (National report: 47%).
29% of German respondents say the EU offers protection against the negative consequences of globalisation according to C.A.M. data (National report: 36%), 63% disagree and 9% do not know (no data by the National report).
According to C.A.M data: (data are not provided by National report), 51% of German respondents say the increase of competition in certain sectors due the European market has positive affects, 14% say it has negative affects, 7% do not know.
When hearing the word globalisation, 37% of German respondents think of relocation to countries where wages are lower: 16% think of an increase of competition: 14% of foreign investments; 15% do not know.
2. Survey by Forsa Institute on behalf of newsmagazin ‘stern’, spring 2007 (Stern No. 23, 31-05-2007): Representative survey of 1005 German citizens.
40% of respondents (same figure as 2000) say that globalisation leads to more personal advantages than disadvantages (60% of those younger than 30 years, 43% of those aged 30 - 44 years, 34% of those aged 45-59 and 29% of those older than 60 years.)
The number of those who say that globalisation leads to personal disadvantages amounts to 34% , which means an increase by 15% from a similar survey conducted in 2000.
81% of all respondents reject the acquisition of a German company by a foreign corporation. 67% say that globalisation increases the gap between the poor and the rich. 53% note that consumer goods have increased, 46% note that new chances in their jobs have increased, 39% fear job loss.
3. In March 2006, market research institute IPSOS conducted a representatitve survey (1,000 phone interviews, nationwide, individuals aged 14 years and older in private households) on perception of globalisation. The survey was conducted on behalf of the association of German market researchers BMV (BMV Trend report 2006)
Because of globalisation, 63% of German respondents expect personal disadvantages and disadvantages for the country as a whole (labled ‘pessimists’). Only 13% expect advantages for themselves or for Germany (optimists’). 12% expect a mixed balance.
52% of the respondents wish the globalisation process to slow down. 24% wish that the process accelerates, 18% agree with the dynamic. 57% think the process will accelerate even more.
The perception of the pessimists is influenced by fear of job cuts, the perception of optimists by consumer interests.
About 60% say that globalisation opens new markets for companies, but about 60% wish government to protect German companies to be bought by foreign companies.52% expect the rich countries to get richer and the poor countries to get poorer.
The three surveys give no information on the charactistics of the respondents.
Have these surveys made a distinction between the different dimensions of globalisation (as listed above) or have separate surveys been carried out on these dimensions?
If so, please summarise the main findings of these as regards:
off-shoring(or the relocation of production abroad;
the take-over of domestic companies by foreign-owned ones and/or the growing extent of control by foreign companies of parts of the domestic economy
the establishment of new plants and offices by foreign-owned companies
Where possible, please give a breakdown in each case in terms of the characteristics of respondents (e.g. by sex, age, socio-economic group, education level, occupation, sector of employment or region)
Distinctions between the different dimensions were not made.
Have these surveys made an explicit distinction between globalisation and the process of European integration, by, for example, distinguishing between relocation of production to other EU Member States and relocation to countries outside the EU or between the take-over of domestic companies by EU-owned firms and take-over by a non-EU companies?
If so, please give summary details of the differences in response to EU integration as opposed to globalisation.
Distinctions were not made.
Birgit Beese, WSI