Employers react negatively to metalworking agreement

The new collective agreement for the German metalworking sector, signed in February 1999, has attracted adverse criticism from employers' organisations, and prompted a variety of reactions, including resignations and internal reorganisation and rules changes.

In February 1999, the social partners in the German metalworking sector signed new collective agreements for more than 3.2 million employees. The agreements basically provide for a 3.2% pay increase, plus a flat-rate payment of 1% of annual income. While the IG Metall metalworkers' trade union is to a large extent satisfied with the bargaining results, the employers see the costs of the new agreements as being much too high, and state they were accepted only in order to avoid a possible strike (DE9903295F).

At national level, Werner Stumpfe, the president of the metalworking employers' association, Gesamtmetall, issued a statement claiming that the agreed pay increase was much too high and would lead "to a reduction of jobs in the German metalworking industry". Furthermore, the agreement would be a set-back for Germany's "new partnership". The employers' association felt itself "blackmailed" by the unions and accepted the new agreements only in order to prevent a possible strike. In its first comment on the pilot agreement in Baden-Würtemberg- known as the "Böblingen compromise" - Gesamtmetall even declared that it would not make, as it usually does with pilot agreements, a recommendation for its other regional employers' association to follow the deal. Since Baden-Würtemberg has the best-performing companies in German metalworking, Gesamtmetall argued that other regions were not able to accept such a "high-cost settlement".

At regional level, the new agreements reinforced the debates within the metalworking employers' associations on organisational changes to make it easier for companies to remove themselves from the coverage of collective agreements (DE9708128F):

  • In January 1999, the regional metalworking employers' association in Saxony (Verband der sächsischen Metall- und Elektroindustrie, VSME) changed its statute in order to give associated companies the opportunity to quit the association at four weeks' notice, with the permission of the association, in order to avoid economic hardship. Since the new metalworking sector collective agreements became valid in eastern Germany with a delay of one month, companies in Saxony were thus easily able to avoid the binding agreement. In 1998, similar provisions had already been introduced by the regional metalworking employers' associations of Thuringia and Saxony-Anhalt.
  • In the western federal state of Rhineland-Palatinate, the general assembly of the regional metalworking employers' association (Verband der Metall- und Elektroindustrie Rheinland-Rheinhessen, VEM) has decided to establish a new employers' association which does not conclude branch-level collective agreements. The new association will cover the northern part of Rhineland-Palatinate and is planned to be named Unternehmenverband Mittelrhein. According to Edgar Georg, chair of VEM, the new association is the consequence of the recent agreement "forced" upon metalworking employers by IG Metall. VEM has faced declining membership in recent years, mainly due to the resignation of companies which were not satisfied with the branch-level collective agreements. Furthermore, new firms have not been joining VEM.
  • Martin Kannegiesser, president of the Northrhine-Westphalia metalworking employers' association (Verband der Metall- und Elektro-Industrie Nordrhein-Westfalen, METALL NRW), which is the largest regional metalworking association, representing about 3,000 member companies with a total of 760,000 employees, demanded discussions about solutions which would allow member companies to escape from branch-level collective bargaining while at the same time enjoying the solidarity of, and integration in, an employers' association.
  • In Lower-Saxony, the regional metal employers' association (Verband der Metallindustriellen Niedersachsens, VMN) quit the regional "pact for employment" (Bündnis für Arbeit), following a decision by its membership assembly. In an interview with the newspaper Bild, Dietmar Kröncke of the VMN said that it was not possible to be forced to conclude collective agreements which cost thousands of jobs, and then to return arm-in-arm to the bargaining table with the trade unions and have a chat about jobs.

After the collective agreement was concluded, a number of regional newspapers reported cases where metalworking companies had announced that they would cut their workforce and quit their regional sectoral employers' association. One reported case is the medium-sized machine construction company, Kuhnke (in Schleswig-Holstein), which has announced job reductions. The company states that the new agreement will lead to personnel cost increases of about DEM 2 million, and management and works council are already negotiating on cost reductions - for instance, reducing wage paid above the standard rate - in order to avoid job losses. Furthermore, management intends to transfer labour-intensive production to locations in other countries, such as Sibiu in Romania where the workforce will be increased from 25 to 200 employees in 1999. Kuhnke also intends to quit the regional metalworking association, Nordmetall.

The trade association for metalworking (Verband Deutscher Maschinen- und Anlagenbau, VDMA) issued a statement claiming that the new agreement would result in "massive job reductions" in the machine construction sector. VDMA chair Eberhard Reuter repeated his demands for a change in the Works Constitution Act (Betriebsverfassungsgesetz) which would generally allow works councils and management to conclude works agreements which include deviations from collective agreements.

Reinhard Göhner of the Confederation of German Employers' Association (Bundesvereinigung der deutschen Arbeitgeberverbände, BDA) said that the metalworking agreement would destroy jobs and warned other branches not to follow it.

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