Company-level alliance for jobs agreed at Ford

On 6 March 2006, a company-level alliance for jobs was agreed at Ford Germany between management and the works council. The deal will, in return for wage concessions, prevent dismissals at German sites until 2011. Both sides hailed the alliance as a success.

On 6 March 2006, Ford announced that a company-level alliance aimed at safeguarding jobs had been reached; the agreement applies to Ford’s two German sites, in Cologne and Saarlouis. The agreement between management and the works council was presented to employees at extraordinary meetings, and involves a promise by the company not to undertake collective dismissals until 2011 in return for wage concessions by employees. The deal covers 18,500 employees in Cologne and 6,400 employees in Saarlouis. In November 2005, Ford declared that 1,200 employees in Germany were to be made redundant by the end of 2005. Dismissals could, however, be avoided if employees took voluntary redundancy; any such workers would receive financial remuneration.

The agreement

The new settlement at Ford stipulates that the production of three model ranges will continue at the German sites. The plants in Cologne and Saarlouis are regarded as being among the most productive factories in the car industry; however, the modernisation and adaptation of the production facilities at both plants requires considerable investment in the coming years. Management also announced that 150 apprentices would receive a job offer once they had completed their training.

In return for the company’s commitment, firstly, to preserve production at German sites and, secondly, to safeguard jobs, the works councils agreed to a cost-cutting compensation package that is expected to save the company €166 million. This cost-cutting programme consists of four elements:

  1. Wage increases that may be settled by collective agreements in the future are to be set off against company-specific payments. Wages at Ford, which are at present 10% above those stipulated by the collective agreement in the metalworking industry, will be brought more into line with the latter. By 2011, the wage gap between wages at Ford and those in the metalworking industry is, therefore, expected to shrink to 6.5%.
  2. Entrants and apprentices who have finished their training will be paid according to the ruling collective standards in the metalworking industry.
  3. The working hours of about 2,300 white-collar employees, who are currently not covered by collective standards (außertarifliche Angestellte), will be raised from 38.5 to 40 hours a week, in return for full monetary compensation.
  4. Overtime will be recorded in working time accounts. This working time arrangement will also enable employees to retire before the mandatory retirement age is reached, without incurring financial losses. At present, early retirement involves a considerable reduction in the monthly pension.

Reaction

In an article in the Frankfurter Allgemeine Zeitung on 7 March 2006, Bernhard Mattes, General Manager at Ford Germany, declared that this company-level alliance significantly improved the competitiveness of the German plants. Moreover, the deal could serve as a model for best practice. Dieter Hinkelmann, Chair of the works council at Ford, praised the agreement as a major success as it would mean that dismissals would be ruled out until 2011.

Commentary

The agreement at Ford shows how pay and working conditions can be adapted to changing market conditions in a quick and flexible manner without industrial conflict. However, this may only hold true for enterprises in which pay levels considerably exceed the collectively agreed minimum standards in the specific industry. Despite the wage concessions in cases such as Ford, the employees concerned are often still better off than their colleagues who are covered by sectoral collective agreements.

Oliver Stettes, Cologne Institute for Economic Research (IW)

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