Industrial relations in the automotive sector

  • Observatory: EurWORK
  • Topic:
  • Date of Publication: 08 December 2003



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Author:
Roberto Pedersini
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The automotive sector, including the production of both vehicles and components, employs around 8% of the EU's manufacturing workforce. However, its significance goes beyond this, not least as a traditional stronghold of trade unions and collective bargaining, and as a major source of innovation in areas such as the organisation of production and industrial relations. This comparative study analyses the main characteristics of industrial relations in the automotive sector in the current EU Member States, Norway and four of the countries which join the EU in 2004 (Hungary, Poland, Slovakia and Slovenia). It examines the key features of trade union and employer representation and collective bargaining, and of the policies adopted by companies, as well as taking a special look at the evidence of the emergence of some form of transnational industrial relations in the sector.

The significance of the automotive sector - ie the manufacturing of vehicles (cars, lorries, buses etc) and components for them - for the European and worldwide economy and for industrial relations goes beyond its share in GDP or in total employment, though these both remain quite relevant. It was in the automotive sector that the achievements of the post-Second World War economic boom found their most complete realisation, in terms of production and organisational developments (it is not by chance that the 'Fordist' production system takes its name from a car manufacturer), while at the same time some of the most important features of industrial relations systems were shaped. The manufacturing of cars was at the core of the metalworking sector, which was long at the forefront of economic and industrial relations developments in the 'industrial age'.

At present, even if manufacturing and the metalworking sector have lost some of their centrality, the automotive sector remains in a crucial position in terms of the transformation of the economy, of organisational models and of industrial relations. Within the manufacturing sector, the car industry is probably one of the activities where the reorganisation of production, the creation of global production networks, the role of transnational companies and innovations in organisational models and human resource management practices have reached the highest levels. The automotive sector has often acted as a pace-setter, or at least front-runner, for transformations which later became general, such as 'lean production' and 'just-in-time' systems and 'Toyotism' (whereby, again, a whole production system takes its name from a car manufacturer).

For all these reasons, an analysis of industrial relations in the automotive sector may be particularly useful in identifying possible trends in industrial relations, as well as some of the impacts of the internationalisation of economic activities.

This comparative study - based on the contributions of the European Industrial Relations Observatory (EIRO) national centres in the EU Member States, four acceding countries due to join the EU in 2004, and Norway - studies the main features of industrial relations in the automotive sector (broadly defined to include the manufacturing of both vehicles and components), highlights the changes which are taking place and identifies possible trends. In particular, the study aims to analyse:

  • the main features of the structure of the automotive sector in EU countries, Hungary, Poland, Norway, Slovakia, and Slovenia;
  • the principal characteristics of trade union and employers’ representation;
  • the collective bargaining structure;
  • developments in transnational industrial relations; and
  • the main contents of company policies.

Industry overview

Since the 1980s, the control of final assembly of motor vehicles has been progressively concentrated in a small number of transnational companies, which are now connected to a series of equally transnational basic equipment manufacturers and a myriad of second- or third-level suppliers. As a consequence, the sectoral structure has greatly changed in recent years from a relatively vertically integrated system to a globally dispersed one. These twin processes of concentration and dispersion have affected different countries in different ways and today the importance of the automotive sector, or of its segments, is quite varied across European countries. A list of major manufacturers of vehicles and components is provided in table 7 in the annex at the end of this study.

At EU level, the automotive industry represents some 8% of total employment in the manufacturing sector - see table 1 below. Recent trends include a reduction of employment in the manufacturing of vehicles, which has been more than offset by an increase in employment in suppliers. This reflects the recent reorganisation of the industry through outsourcing processes and the concentration on core activities (mainly final assembly and engine production) by major motor companies (TN0008201S).

Table 1. Employment in the automotive sector in the EU, 1999-2001 (absolute numbers and as % of total employment in manufacturing)
. Manufacture of motor vehicles % Suppliers % Total %
1999 1,117,100 4.4 782,500 3.1 1,899,600 7.5
2000 1,096,100 4.6 860,396 3.6 1,956,517 8.3
2001 1,042,313 4.4 900,468 3.8 1,942,781 8.2

Source: European Automobile Manufacturers Association ( ACEA), European Union Economic Report, 2003

The varying weight and character of the automotive sector in different European countries - indicated by table 1 above and tables 2 and 3 below - depend on various elements. These include: the traditional presence of national car manufacturers (as in France, Germany, Italy, Spain, Sweden and UK); the establishment of 'greenfield' sites in recent decades, mainly through foreign investment, both within the EU and, significantly, in central and eastern European countries; merger and acquisition activity, which has been growing since the beginning of the 1990s; and the thorough-going reorganisation processes which have marked the development of the whole sector in recent years.

Table 2 below shows that the automotive industry represents an important and stable component of the European economy. Its significance varies considerably from country to country and can be as high as almost 11% of total dependent employment in manufacturing in Germany, corresponding to nearly 900,000 workers, or absolutely marginal, as in Greece with only 3,000 employees in 2001.

Table 2. Employment in the automotive sector as share of total employment in manufacturing and recent trends, European countries, 1997-2001 (%)
Country Share of total employment in manufacturing 2001 Change in share of total employment in manufacturing 1997-2001 Change in absolute numbers 1997-2001
Western European countries
Germany 10.95 16.8 19.3
Belgium 8.65** -1.5** -1.5**
Spain 8.75 4.2 31.4
France 7.49*** -0.3*** 0.3***
Sweden* 10.01 8.1 10.9
UK 5.57 -2.6 -11.3
Austria 5.47 22.8 22.4
Italy 4.26 -5.0 -3.4
Portugal 3.20 -15.5 -2.6
Netherlands* 1.88 - -
Finland 1.80 23.1 33.3
Denmark 1.71 7.9 2.6
Ireland 1.59 40.0 63.0
Norway 1.44 -7.9 -20.0
Greece 0.73 66.8 76.5
Average A (unweighted) 4.63 - -
Central and eastern European countries
Hungary 4.78 16.3 28.7
Poland 3.84** 3.2** -4.5**
Slovenia 3.08 -6.0 -11.1
Slovakia 4.23 29.0 13.7
Average B (unweighted) 3.98 - -
All countries
Average A B (unweighted) 4.50 - -

Source: ILO statistics, LABORSTA , except * EIRO, year of reference 2002.

Notes: ** 1999, *** 2000.

The clear prevalence of 'traditional' motor manufacturing countries is evident from the distribution of total European employment in the sector between countries (see table 3 below): Germany alone counts for more than two-fifths of total automotive employment in the countries included in the study. Far behind in second place is France, with 13.1% of total automotive employment, followed by Spain (10.5%), the UK (9.6%) and Italy (7.8%). Among central and eastern European countries, Poland has the highest share in employment (nearly 5% of automotive employment in all countries covered by the study and nearly two-thirds of that in the acceding countries), followed by Hungary (1.6%), Slovakia (0.7%) and Slovenia (0.4%).

Table 3. Total employment in automotive sector in European countries and distribution by country, plus % of total automotive employment in suppliers, 2001
Country Total employment (NACE code 34) (thousands) Distribution of total European employment by country, % % of all automotive employment in suppliers (NACE code 34.2-3)*
Western European countries
Germany 897.0 40.7 44
France 287.9*** 13.1 38
Spain 232.0 10.5 75
UK 212.0 9.6 57
Italy 173.0 7.8 61
Sweden* 75.4 3.4 43
Belgium 53.7** 2.4 35
Portugal 30.4 1.4 86
Austria 29.2 1.3 33
Netherlands* 20.1 0.9 43
Denmark 8.0 0.4 100
Finland 8.0 0.4 64
Luxembourg* 5.3 0.2 100
Ireland 4.4 0.2 100
Norway 4.0 0.2 93
Greece 3.0 0.1 -
Total A 2,043.4 - 52
Central and eastern European countries
Poland 100.4** 4.6 67
Hungary 36.3 1.6 71
Slovakia 15.8 0.7 44
Slovenia 8.0 0.4 57
Total B 160.5 - 64
All countries
Total A B 2,203.9 100.0 53

Source: ILO statistics, LABORSTA , except * EIRO , year of reference 2002.

Notes: ** 1999, *** 2000. NB: since data do not originate from a single source, total figures and percentages should be considered only as indications.

Another significant distinction can be drawn between those countries where the manufacturing of vehicles is dominant, as opposed to those where the main activities are in the supply chain (see table 3 above). As can be seen from table 4 below, the countries where the economic and employment weight of the automotive sector is higher are mainly those where the traditional production of vehicles under national brands is present. Among acceding countries, Slovakia is apparently emerging as a location for this main segment of the automotive sector, as has happened in Austria in recent years. Unsurprisingly, in countries where the presence of the automotive industry is less significant, activity essentially involves the manufacturing of supplies, as in Denmark, Finland, Ireland, and Norway. The other central and eastern European countries examined (ie except from Slovakia) are involved in supplies and appear to be becoming important elements in the global production network of the automotive industry. In the current EU, Portugal and Spain have a significant role as suppliers of components, while in Italy and UK outsourcing processes have apparently led to the prevalence of the supply chain over the main vehicle manufacturers, as far as employment is concerned. The Netherlands has a specific position, as vehicle manufacturing is prevalent in the automotive sector while the sector's share of total employment in manufacturing is rather small. This is a consequence of the presence of important plants for the production of both cars (NedCar, the main car manufacturer in the Netherlands, which produces for Volvo and Mitsubishi) and trucks (DAF-Paccar and Scania).

Table 4. Classification of European countries by importance of automotive sector in terms of employment and by type of production
. Share of total employment in manufacturing
Over 3% Under 3%
Type of production More vehicles Austria, Belgium, France, Germany, Slovakia, Sweden Netherlands
More components/supplies Hungary, Italy, Luxembourg, Poland, Portugal, Slovenia, Spain, UK Finland, Norway, Denmark, Ireland, Greece

In terms of change over time (table 2), the key position of the automotive sector in Germany has not declined in recent years or been adversely affected by reorganisation and relocation processes. Rather, this position has been strengthening: since 1997, both total employment in the sector and its share of all employment in manufacturing have increased considerably. The same can be said for Spain, which shows a significant rate of employment creation in the sector, mainly concentrated in the automotive supply chain, even if the increase may be somewhat overestimated due to a change in the statistical series in 2000. France, on the other hand, show a stagnation of employment, while in Italy and UK there has been a net decrease in sectoral employment, both in absolute levels and in its relative importance in manufacturing. Austria has been emerging as a country where automotive operations have been increasing steadily in the latest years, probably because of its vicinity to central and eastern European markets. Among the acceding countries examined, Hungary and Slovakia have experienced a significant increase in employment in the automotive sector, while Poland - which is a country with a longer tradition and the highest number of jobs in this sector among the acceding countries - and Slovenia show an erosion of employment levels.

In countries where the automotive sector has only a marginal role in the economy (such as Finland, Ireland, Norway and Greece), the rates of change in employment might be misleading and are not particularly informative. For instance, Greece had the highest rates of growth over 1997-2001 in terms of both total employment in the sector and its share of all employment in manufacturing. Nevertheless, it appears that the industry has practically disappeared from the country (in 2001, it involved only 3,000 workers) and it was not possible to collect relevant information for this study.

It was not possible to collect complete data on the distribution of employment by gender in the automotive sector. However, from the scattered information included in the national reports from the EIRO centres, it is possible to say that the presence of female workforce is limited to a percentage that usually does not exceed 20%.

An important feature of the automotive sector, which highlights the notable internationalisation of operations, is the high proportion of international trade in domestic production. The share of exports in national production can be as high as 80%-90%, as in Austria and Belgium, but it is quite significant even for the major manufacturing countries, where production is often essentially destined for foreign markets.

The present economic stagnation in Europe has affected the automotive market. For instance, the registration of new motor vehicles has decreased significantly in western Europe since 2001 (down 3.5% in 2002 and with a similar reduction forecast for 2003, according to ACEA). The production of vehicles has diminished too, but to a lesser extent and it already shows some signs of recovery (see ACEA's June 2003 European Union Economic Report).

Trade union and employer representation

The automotive sector represents a central segment of the traditional metalworking industry and is a stronghold of trade unions. This situation is well illustrated by the data on unionisation in table 5 below: union density in the automotive sector is usually well above the national average and that for manufacturing. Even in countries where union presence is generally low, as in France, or scattered, as in the UK, the automotive sector has a strong presence of unions and relatively high unionisation rates. In France, sectoral union density is reportedly around 20% (compared with well under 10% in the private sector as a whole), while in UK it stands at a high (in national terms) 44% and in the main production sites reaches almost 100% among blue-collar workers and around 50%, or above, among white-collar workers. Therefore, the automotive sector in UK seems to represents one of the areas where the role of unions and industrial relations has remained strong and comparatively stable over recent decades. However, it must be pointed out that this situation does not extend to the whole sector in the UK and not even to all major companies. In fact, the position of the unions is particularly strong in the long-established locations of European and US-based manufacturers, while the more recently-established Japan-based motor companies are thought to have lower union density and there is a growing minority of sites in the automotive components segment where no unions are recognised. A similar, strong role of unions in the automotive sector can be found in acceding countries, especially in Poland, where sectoral union density is more than double the national average (some 40% compared with 15%). It is somewhat higher than average, though not to the same extent as in Poland, in both Hungary and Slovenia, while in Slovakia it is substantially in line with the average national unionisation rate.

This picture of high unionisation corresponds well to the situation in larger companies and especially vehicle makers. It does not necessarily correspond to the situation in many firms belonging to the components segment, where unions may in some cases be non-existent, as small and medium-sized enterprises (SMEs) are often the dominant business form. This fact might explain the only notable exception to the 'rule' of a higher presence of unions in the automotive sector compared with overall levels: Denmark. Here, the automotive sector is rather marginal and centred around suppliers of components, which in many cases are SMEs with a less significant presence of unions. A division of union presence along the boundaries of subsectors, with higher unionisation in vehicle manufacturers than in suppliers of components, is reported from a number of countries and can be regarded as being a common feature. Possible reasons for this difference may be found in the more fragmented and dispersed structure of subcontracting and the smaller average size of firms. Such an unbalanced distribution of union density across subsectors might be important when considering the effects of restructuring and of the outsourcing processes which are often linked to such change. However, the considerable presence of large multinational companies in the automotive supply chains, reduces, at least to some extent, the potential impact of outsourcing on union presence and the role of industrial relations, compared with other industries where local, often union-free, SMEs are predominant.

Table 5. Unionisation rates in the whole economy and in the automotive sector (%)
Country Whole economy Automotive sector
Austria 40 60
Belgium 69 na
Denmark 88 50
Finland 79 90
France 9 20
Germany 30 75
Hungary 20 25
Ireland 45 na
Italy 35 38
Luxembourg 50 na
Netherlands* 25 na
Norway* 52 59
Poland 15 40
Portugal 30 na
Slovakia 35 35
Slovenia 41 50
Spain 15 na
Sweden 79 90
UK 29 44

Source: EIRO. Data on the whole economy come from the EIRO study Industrial relations in the EU Member States and candidate countries (TN0207104F), while those on the automotive sector were collected for this study. When no official or research data were available, the EIRO national centres provided their own estimates. * All figures were provided by the EIRO national centres for this study.

Trade union representation - as with employers’ associations, as we shall see below - is usually organised according to criteria which go beyond the automotive sector, though of course this depends on the particular features of each national industrial relations system. When the main reference point for union structures is the sector, it is usually the metalworking industry - or sometimes manufacturing - which cover automotive operations. A broad definition of the automotive industry, which comprises all suppliers, can involve a plurality of sectoral unions, such as those in the electronics sector (when it is separate from metalworking) or in the plastic and rubber industry. Specific blue- or white-collar unions may also also present, as well as professional and general unions, depending on cleavages in national union representational domains. Ideological orientations might be important too, as in Italy and France. For all these reasons, union pluralism is generally the rule in the automotive sector across Europe.

The presence of company-specific unions is generally an exception in western Europe - though one can currently be found in the automotive sector in Italy in the form of Fismic, a company union established at Fiat at the end of the 1950s, which has since sought wider representation in the metalworking sector. The situation is not the same in central and eastern Europe, where the developments which followed the fall of the communist regimes and the establishment of democracies and market economies led to the emergence of industrial relations systems characterised by a significant degree of decentralisation. There are also major differences between large and small businesses and between public and private firms, and a high degree of heterogeneity between geographical areas in terms of economic structure and growth, and local labour markets. In these circumstances, a number of company unions have emerged, and the automotive sector is no exception. In Hungary, in particular, there are company unions in almost all major production sites. Some of these trade unions are independent, while others are direct members of union confederations. In Slovenia, a company union, the Revoz Trade Union (Sindikat družbe Revoz, SDR) has been established in the major motor company - Revoz, a subsidiary of the Renault group and the only vehicle manufacturer in the country - as a split from the main sectoral union. The principal reason behind this division was an attempt by company union representatives to take advantage of the particular conditions of the company, in order to obtain better conditions than those which could be won in national-level bargaining.

It seems that the relative weakness of unions in acceding countries at national sectoral level (TN0207102F), as well as the great variety of situations that can be found in different companies, provide significant incentives for workers in certain firms (those which are larger, with better economic performance and in more economically advanced areas) to establish company unions. However, company unions are not the exclusive form of representation in the automotive sector in acceding countries, rather they supplement existing sectoral unions, which continue to be the principal actors in national industrial relations.

As with the case of the unions, employer representation in the automotive sector follow the patterns typical of each national system. Here, however, the variety of organisational forms is far less pronounced. In fact, the main representational domain for employers’ associations is the industry, and in this case usually the metalworking industry. Where a sectoral association does not have a direct collective bargaining role, it acts essentially as a trade association. Moreover, specific trade associations are usually present for the automotive sector. Given different industry features and members’ interests, it is common to find different trade associations for the various subsectors: essentially for manufacturing of vehicles and of components.

There are only two countries where specific automotive employers' associations proper are present: Portugal and Poland. In Portugal, there are a number of employers’ associations which covers all segments of the automotive market, including sales and repairs, and engage in collective bargaining - eg the Association of Automotive Assembly Industries, Associação dos Industriais de Montagem de Automóveis, AIMA) and the National Automobile Sector Association, Associação Nacional do Ramo Automóvel, ARAN). In Poland, there is a sectoral association which represents the major automotive companies - the Association of Automotive Employers (Związek Pracodawców Motoryzacji, ZPM) - while individual companies, such as Fiat, are members of an intersectoral organisation - the Polish Confederation of Private Employers (Polska Konfederacja Pracodawców Prywatnych, PKPP). So far, attempts to conclude a sectoral agreement in Poland have been unsuccessful (see below).

The structure of collective bargaining

The pattern of collective bargaining in the automotive sector in each country displays the characteristics which are typical of national bargaining systems - see table 6 below. This means that the main level of collective bargaining is in most countries is the metalworking industry, of which the automotive sector represents only a part. However, given the particular features of automotive production and of the changes and restructuring which have been taking place in recent decades, decentralised bargaining is quite important, especially in the main vehicle manufacturers.

Agreements for the whole metalworking sector, or similar, cover automotive firms in Austria, Belgium, Denmark (where the agreement covers manufacturing generally), Finland, France, Germany (with the exception of Volkswagen- see below), Italy, the Netherlands, Norway, Slovakia, Slovenia, Spain (though see below) and Sweden - in cases such as Belgium, Finland, Norway and Slovenia these agreements fall within wider national intersectoral frameworks. Naturally, this generally results in a high level of bargaining coverage in the sector, which is virtually 100% in countries such as Austria, France, Portugal and Spain. Within these essentially sectoral systems, however, company- or establishment-level bargaining in many cases plays a role. In France, for example, sector-level agreements are supplemented and improved by company-level agreements, while sectoral agreements in countries such as Denmark, Finland, Italy, Norway and Sweden leave a varying scope for subsequent lower-level bargaining. The greatest role for company bargaining in a nominally sectoral system is probably found in Spain, where provincial-level sectoral agreements lay down only minimum conditions which are superseded by company agreements in the main vehicle manufacturers and suppliers. In Denmark, there is significant decentralisation of the regulation of all major issues, such as pay and working conditions, within a sectoral framework agreement for manufacturing.

There are a some exceptions, however, where collective bargaining covers the automotive sector alone. In France, the metalworking trade unions and the metalworking employers’ association, the Union of Metal Manufacturing, Mining, Engineering, Electrical and Metal Equipment and Allied Industries (Union des Industries et Métiers de la Métallurgie, UIMM), sometimes conclude agreements just for the automotive sector - an example being a 1999 agreement on early retirement which will be valid until 2004 (FR9908103N). A country where attempts are underway to create an industrial relations system which refers specifically to the automotive sector is Poland. Since 1998, talks have been held between the unions and the automotive sector employers’ associations to define an industry-wide agreement. In May 2001, a final document was drafted, but the employers eventually did not sign it, as the Association of Automotive Employers (ZPM) decided to leave the negotiations. These developments occurred at a time when a crisis in the Polish automotive sector was deepening. The situation has not improved since then and, so far, it is not clear whether the parties will be able to reach a multi-employer agreement in future. Portugal, as already mentioned, is the only country where there is a sectoral industrial relations system for the automotive sector which includes collective bargaining. However, the definition of the automotive sector is quite broad - and broader than the one which has been used for this study - as it encompasses manufacturing, commerce and services such as post-sales assistance and repairs.

In a number of countries, collective bargaining is fully decentralised to company level. For example, this is the case in the UK - after the termination of multi-employer bargaining for the engineering industry in 1990 - Ireland (within the framework of national intersectoral agreements) and Luxembourg. Among the acceding countries examined, company-level bargaining is predominant in Hungary, where there is no industry-wide agreement and about half of all unionised automotive companies are covered exclusively by company agreements. An interesting example of company-level bargaining can be found even in a country where sectoral bargaining represents the main level of bipartite collective regulation - Germany. Volkswagen is not a member of the sectoral employers' association and applies a company-level agreement, which on average grants better pay and working conditions than laid down in the metalworking industry-wide accord.

An interesting development in collective bargaining in the automotive sector took place in Italy in 1998 and concerned the conclusion of a 'territorial' collective agreement which covers 22 companies belonging to the network of subcontractors which are located around the the Fiat plant in Melfi. This was the first time that a multi-employer agreement was signed for an integrated system of subcontractors. The companies and the unions agreed to set up a set of inter-firm joint bodies and introduced common provisions regarding some pay bonuses and certain aspects of working time management (IT9806171N).

Table 6. The structure of collective bargaining in the automotive sector, by level
Country Intersectoral Sectoral**** Company
Austria . *** * (works council agreements, where 'opening clauses' apply)
Belgium . ** ***
Denmark * (manufacturing) . ***
Finland ** (tripartite regulation) ** * (increasing importance)
France . *** **
Germany . *** * (works council agreements where 'opening clauses' apply)
Hungary . . ***
Italy . *** **
Ireland * . ***
Luxembourg . . **
Netherlands . ** (metalworking; metal and electric engineering) **
Norway * *** *
Poland . (automotive: under discussion) **
Portugal . *** (automotive) .
Slovakia . ** (engineering; electrical engineering; chemicals) ** (increasing importance)
Slovenia * (manufacturing) ** *
Spain . * ***
Sweden . ** **
UK . . ***

Source: EIRO.

Legend: *** more important, ** important, * less important.

Note: **** General metalworking agreement, if not otherwise stated.

Transnational industrial relations

As mentioned above, the international dimension is very important in the automotive sector, for a number of reasons:

  • manufacturing of vehicles is dominated by a limited number of global companies with multiple locations in both economically advanced countries and less-developed countries;
  • since the 1980s, the industry has implemented a 'de-verticalisation' of production and a widespread use of outsourcing and subcontracting - with the emergence of a few multinational companies in this field too; and
  • the production process has evolved into a global network which connects motor companies, main suppliers of components and a myriad of SMEs which participate in this division of labour on a world scale.

A first consequence of this industry structure is that business strategies are less influenced by national boundaries and by traditional locations. Second, the internationalisation of production has combined with the internationalisation of markets and increased competition, so that motor companies are constantly in search of technological, organisational and production arrangements that can improve competitiveness through better industrial and economic performances. These factors can lead to new investments in technology, business process re-engineering, relocation of production, outsourcing, and interventions in forms of work and work organisation. As a consequence, the regulatory capacity of national-level industrial relations may be challenged, especially when investment and location decisions are involved. At the same time, the bargaining power of firms increases, with the potential use of cross-country comparison in terms of labour costs and regulations and productivity levels, as threats of relocation become credible and are often implemented.

These characteristics and the traditionally strong role of trade unions have made the automotive sector one of the front-runners in the emergence of some sort of transnational industrial relations. So far, there are some signs of a growing awareness on the part of the unions of the importance of a supranational level of information and consultation, in order to grasp the logic of corporate strategies and understand their implications, as well as an increasing demand for bargaining opportunities in crucial domains such as global restructuring processes, which affect different countries at the same time. Yet, this growing awareness and demands highlight the weaknesses of the system of available instruments, the difficulty of cross-country coordination of action, and the obstacles represented by the emergence of conflicting interests between workers employed in different company locations.

In order to have full-fledged industrial relations at supranational level, appropriate actors and instruments are needed, as well as a corresponding bargaining level. These conditions are far from being met (for example, there is no EU-level social dialogue in the automotive sector) and it is quite difficult to forecast when or even if they will ever be met at all. For the time being, the only proper transnational actors are, as illustrated above, automotive corporations. Therefore, the few elements of transnational industrial relations in the industry can be found at company level or, more accurately, at group level. The main - though not the only - drivers of such developments are European Works Councils (EWCs), which means that any union initiative needs cross-country coordination on the part of the different national unions represented on these EU-level bodies.

EWCs

EWCs are present in practically all major automotive companies, both manufacturers of vehicles and of components - see table 7 in the annex at the end of this study.. Formally, they are essentially a forum for information and consultation on transnational issues. However, on some specific occasions they have provided an important instrument both for coordination between national unions and for negotiation of some aspects of company policies. Of course, the informal extension of EWCs' entitlements to include some sort of collective bargaining has required both the capacity of unions to exert concerted pressure and a positive attitude towards such extension on the part of the company.

The first notable instance of the role that EWCs can play at a transnational level was represented by the Vilvoorde case, when, at the end of February 1997 the French motor manufacturer Renault announced the closure of its plant in Vilvoorde, Belgium, which employed more than 3,000 workers. This unexpected decision and the lack of any information and consultation with workers’ representatives, and especially with the European Group Committee - as the Renault EWC is called - sparked an unprecedented wave of criticism by political actors and trade unions. This led to what was probably the first-ever genuine European-scale strike, involving some thousands of employees in France, Belgium and Spain, with sympathy actions staged at Volkswagen, Volvo, Opel-General Motors (GM) and Ford plants in Belgium, accompanied by specific demonstrations aimed at obtaining the suspension of the company decision (EU9703108F). In April 1997, a Belgian tribunal annulled Renault’s decision, finding that the company had ignored legal procedures concerning collective redundancies, information disclosure and negotiation obligations (BE9704208N). Renault confirmed its decision, but later in 1998 signed with the unions a change in the terms of the EWC agreement, stating clearly that 'in the event of a planned exceptional decision which has transnational consequences and is of a nature such as to affect significantly employees' interests, the European Group Committee will meet in extraordinary session', so that the results of consultation can be taken into account in the final decision (FR9803195N). The actions which developed around the Vilvoorde case were possible because of the strong role that the EWC was able to play, including in mobilising support among the public and political actors. In all this, the role of the European Metalworkers’ Federation (EMF) was also supportive.

A similar situation developed in 2001, when the GM Europe EWC played a major role, alongside EMF, in organising a European day of action on 25 January 2001 to protest against a company restructuring plan, which envisaged 6,000 redundancies - notably including the end of car production at the Vauxhall plant at Luton in the UK - stating that the EWC had not been informed and consulted on due time. The action involved some 40,000 workers around Europe (EU0102293N). The GM EWC had already begun to develop a form of bargaining role in 2000, when it signed an agreement with management on the effects on employment and employee representation of GM's alliance with Fiat, and it was again able to do so over the 2001 restructuring plan. In March 2001, the EWC and GM management reached an agreement on the plan, which included measures to avoid compulsory redundancies and maintain vehicle production at Luton. Then, later in 2001, GM announced a major restructuring of its Opel subsidiary (the 'Olympia plan'), which was again subject to an agreement with the EWC, which reduced planned job losses and closures and provided for 'socially responsible' workforce reductions, avoiding compulsory redundancies (BE0109301F). The GM EWC has thus taken on a bargaining role which is probably the strongest found in any EWC (as indicated by research into agreements concluded by EWCs conducted by the European Foundation for the Improvement of Living and Working Conditions). However, it was not the first automotive sector EWC to be recognised as a bargaining actor by company management. This was the Ford EWC, which in early 2000 reached an agreement with management on the consequences for employees' status, employee representation and sourcing of the spin-off of the company's Visteon components subsidiary (DE0004254N).

Despite these notable developments, EWCs in most companies remain a relatively weak actor in terms of the coordination of union actions, as they are designed essentially for information and consultation activities. In some cases, as seen above, they can achieve some further scope of action in the event of reorganisation programmes, since they are placed in a crucial position to organise initiatives across Europe, but their active role has essentially been confined to defensive actions. Trade unions make a number of criticisms of the workings of EWCs in this area. First, the absence of any recognition as a bargaining agent is felt by some to be an important drawback for the operations of EWCs. Second, some unions want the EWC to be a genuine trade union structure, rather than a general employee representation body. Third, they point out that such group-level structures may bring together representatives from undertakings operating in quite different sectors, given corporate strategies of business diversification, so that the potential scope of joint action is considerably reduced and the EWC's activities must necessarily remain confined to a very general level. For instance, according to the Italian unions, this is the situation at the Fiat EWC, where only six of the 30 employee representatives are from the automotive division. Finally, difficulties are sometime reported in organising joint and coordinated efforts across different countries, as the specific interests of the different national locations might prevail. The unions are trying to address this state of affairs: as the Spanish unions put it, they are trying to reinforce the 'unionisation' of EWCs, reduce the competition between workplaces, reinforce supranational coordination and strengthen the training of delegates.

Coordination

The activities of the EWCs are not the only area where some sort of European-level industrial relations are developing. However, such developments refer exclusively to coordination efforts on the part of the unions and therefore essentially represent a 'precondition' for, or a first component of, possible bilateral relations with management. The main level of cooperation and coordination among unions operating in the automotive sector is certainly that of the whole European metalworking industry. With the direct support and involvement of EMF, which is very active in this field (as evident from the Vilvoorde and GM cases mentioned above), a number of general sectoral guidelines on the coordination of bargaining activities in metalworking have been issued (DE9812283F). A concrete example of such coordination can be found in Denmark, where the Danish Union of Metalworkers (Dansk Metal, Metal) has started discussions with sectoral unions in Germany and Sweden about coordinating demands during bargaining rounds and implementing procedures to avoid strike action in one country being impaired by shifting production to sites in neighbouring countries.

The potential for such shifts in production have occurred at least twice in the Norwegian automotive sector, when in 1996 and 2000 BMW threatened to cancel purchase contracts with its supplier Raufoss in the event of strikes that blocked production. Though there was no proper coordination between the unions in the two countries, the German Metalworkers' Union (Industriegewerkschaft Metall, IG Metall) reacted firmly and its then leader, Klaus Zwickel, stated clearly that it would not accept companies changing their outsourcing arrangements in response to strikes in suppliers, thereby weakening the strikers' position and putting their jobs at risk. Therefore, he called upon workers and local unions in the German plants affected by the strike actively to prevent other suppliers of components being used as 'strike-breakers'.

The example of BMW and Raufoss highlights one of the various ways in which the structure of the automotive sector and the internationalisation of production networks can affect the regulatory capacity of industrial relations, and seem to demand some forms of adjustment in the existing systems of country-based bilateral relations. In fact, company management appears to be much more able to exploit cross-country comparisons than trade unions. According to recent research carried out in the UK, automotive employers are active in using comparisons of costs and performances in different plants and countries, in order to exert pressure during bargaining rounds and obtain concessions, for instance in terms of higher work flexibility, in exchange for commitments to invest or even avoid divestment and closure. The utilisation of this sort of 'coercive' comparisons by management can be illustrated by the case of a 1997 worldwide reorganisation plan at GM, which was accompanied by a widespread use of inter-plant 'benchmarking'. As a result, there was a series of agreements in Germany, UK and Belgium that traded changes in working practices and the introduction of other measures aimed at reducing costs and enhancing productivity against commitments on future production and investment.

There are, however, some cases of unions and employee representative successfully deploying cross-border comparisons in automotive multinationals. Again taking the example of the UK, at Peugeot’s UK subsidiary - where union representatives often use comparisons with other company plants in negotiations over working practices - the unions successfully pursued a claim for a reduction in working time in 2000 following the conclusion of an agreement in France implementing the 35-hour week in the PSA group (UK0101111F), while at GM Vauxhall, international comparisons were successfully used to secure reductions in working time in 1995 and 1998.

Global initiatives

It should also be mentioned that, beyond the European level, global-scale trade union cooperation initiatives and sometimes bilateral relations with management are found in automotive multinationals. The International Metalworkers' Federation (IMF) has for many years organised 'world company councils' to bring together trade union representatives from a given multinational's worldwide operations. In the automotive sector, IMF currently has 10 such councils - at Fiat, Ford, General Motors, Honda, Mazda, Mitsubishi, Nissan, Toyota, Volkswagen and Volvo.

In terms of bilateral relations with management, the automotive sector has three of the very few 'world works councils' in existence. Volkswagen set up a World Group Council by agreement with workers' representatives in May 1999 (following a number of informal meetings), building on its EWC (DE9806271N). The Council represents Volkswagen operations around the world and meets at least once a year for information and consultation purposes. At DaimlerChrsysler, management and employee representatives agreed to set up a similar World Employee Committee in July 2002 (DE0209204N), while in October 2000 an amendment to the Renault EWC agreement extended its scope to the group's operations worldwide (though non-EU representatives have only observer status).

Finally, the automotive sector has been involved in the phenomenon whereby a number of major multinational companies have signed 'global agreements' or 'international framework agreements' on workers' rights and other 'corporate social responsibility' issues with international trade union organisations or other representatives (EU0105213F). Volkswagen signed a joint 'declaration on social rights and industrial relationships' with its World Group Council and IMF in June 2002 (EU0207203F), while DaimlerChrysler agreed a set of 'social responsibility principles' with its World Employee Committee (also acting on behalf of IMF) in September 2002. The GM EWC (continuing its established bargaining role - see above) and EMF agreed a document on 'principles of social responsibility' with management in October 2002.

Overall, some automotive groups thus appear to be in the forefront of the admittedly limited movement towards some form of global level of industrial relation in multinationals.

Company policies

Automotive companies have always been major players in innovating both production processes and organisational patterns. Since their reorganisation efforts in the 1980s and 1990s, there has been a shift towards 'downsizing' and investment in automation, leaner organisational models centred on teamworking, 'total quality management' (TQM) practices, various forms of worker involvement and direct participation, and work flexibility. A concentration on core activities, outsourcing and the creation of a dense web of subcontracting relationships have been further components of the recent transformation of the automotive sector. As competitive pressure has emphasised the importance of both cost effectiveness and quality, personnel management has been essential in guaranteeing high rates of equipment utilisation and the reduction of average costs, essentially through work flexibility, and in improving quality performance, thanks to various forms of teamworking, 'quality circles', delegation of authority and a significant use of training.

All of these measures are reported from the countries examined in this study, though with different emphasis, depending on the specific features of each company’s strategies and of the national regulatory framework in which such strategies have been developed. An interesting feature seems to be the presence of various kinds of financial participation practices, including share-ownership programmes (as at Renault, where workers hold 3.4% of the shares), profit-sharing and performance-related pay. Another widespread practice is the implementation of incentive schemes linked to workers’ suggestions on improving quality or the workplace environment. Such a programme is used, for instance, at Revoz in Slovenia. In the first eight months of 2003, 60% of employees provided suggestions that the company regarded as useful. The programme seems to be relatively successful, as the participation rate, the number of suggestions (an average of 9.2 suggestions per person), and the amount of bonuses distributed (EUR 67,000 in the first six months of 2003) show.

In the European automotive sector, the problem of skill shortages does not seem to be particularly acute, in part because firms often implement significant training programmes or establish relations with outside institutions, such as schools and colleges, in order to cope with their internal needs. In the UK, for instance, open learning policies have been introduced in the framework of broader employee development programmes in firms such as Ford, Jaguar and Rover. Sometimes, such initiatives are negotiated with trade unions, as in France where Renault signed an agreement in 2001 on linking the job grades of 17,000 production operators to skills acquired through training, and has concluded a number of deals on career paths (for technicians and supervisory staff in 2002, and for manual workers in 2003). A prominent example of connection between vocational training and formal education is provided by the German system, where all major automotive firms have created their own training facilities and offer a significant number of apprenticeship places. In 1995, Volkswagen created a specific subsidiary (Volkswagen Coaching GmbH) in order to manage all activities connected to internal training and apprenticeships. Volkswagen appears to be trying to transfer a similar approach to its location in Slovakia, where it has developed a cooperation agreement with secondary schools in Bratislava to train electricians.

A very significant feature of company policies is the recurrence of industrial restructuring, which seems to hit the automotive sector especially when economic prospects worsen. At present, in the wake of economic stagnation and a significant reduction in sales of new cars (down 3.5% in 2002), reorganisation efforts are under way in a number of motor companies, including Fiat (where an overall reduction of some 3,000 jobs is envisaged - IT0212211F) and Ford (with 3,000 redundancies threatened at the Genk plant in Belgium in autumn 2003).

Apart from economic conditions, reorganisation efforts in vehicle production are also an effect of the continuing search for rationalisation of production across different sites and a consequence of investment decisions guided by competitive strategies. In the case of components manufacturing, which is a relatively more labour-intensive sector, restructuring may be linked more closely to cost-saving efforts, as labour costs can become important when investment and relocation decisions have to be taken. Spain has been experiencing this kind of pressure for some time now, as certain suppliers have decided to move their operations, especially to central and eastern Europe or North Africa. For instance, the US-based components multinational Lear has recently closed its cabling plant in Barcelona and relocated production to Poland, where labour costs are significantly lower, thereby making redundant 1,000 workers, mostly women (ES0206201N). Moreover, when a major motor company decides to move its production to another location, there may be 'multiplier effects', as the relocation of vehicle manufacturers sometimes also requires the transfer of some suppliers, given the tendency to create clusters of automotive firms around the main producers, and owing to the net loss of business opportunities for the smaller local suppliers, which are not tied to the main manufacturer by long-term partnership agreements.

Such a connection between investment decisions, relocation and clustering took place recently in the Netherlands, when NedCar made a major investment in modernisation, with a view to concentrating on core activities and resorting to a significant extent to outsourcing. It asked its main suppliers to move their plants near to its assembly location, so as to make outsourcing easier and to favour the transfer of former NedCar employees to subcontractor firms. The creation of clusters has been a typical feature of the growth of the automotive industry in Spain. In Italy, investment in the greenfield Fiat plant at Melfi, in the mid-1990s, meant the relocation of many subcontracting firms to the same area. More recently, a reorganisation exercise at Volkswagen's operations in Belgium included the establishment of a so-called 'automotive park' within an enlarged production site to bring subcontractors together.

A final noteworthy aspect of company policies refers directly to recognition, or otherwise, of the role of the unions and of industrial relations. While the role of the unions is well established in most automotive companies in the current EU Member States, clear examples of 'union-avoidance' practices are found in some of the acceding countries. For instance, the major car assembly plant in Hungary, the Suzuki site in Esztergom, is a union-free workplace and the company has signed a works council agreement. In Slovakia, commentators distinguish between two different groups of automotive firms: those which apply a so-called 'German approach', whereby the company recognises the representation role of the unions and the possibility of reducing conflict through collective industrial relations (such as Volkswagen, Delphi and Lear); and those which prefer the so-called 'US approach' and consider that it is better to build direct relationships with employees and try to avoid the establishment of local unions (Leoni and Johnson Controls, for example, are said to fall into this category).

On a smaller scale, it is also possible to find similar attitudes in some EU locations, which derive from specific corporate cultures. In the UK, negotiations over pay and major working conditions in the three Japan-based manufacturers - Honda, Toyota and Nissan- take place between the company management and elected employee councils which are not union based (although some of the representatives may be union members). This situation reflects a specific approach to labour relations which emphasises the role of direct relationship with employees. In Austria, in 1999, referenda were held in three Magna Steyr plants on the setting up of works councils. In all of them, the majority of workers voted against the establishment of works councils and in favour of the system of 'employee spokespersons' which is present in the Magna group and is part of its personnel management policies. The unions strongly opposed this direct participation scheme and criticised the company for avoiding the establishment of works councils (AT9909165F), but the conflict now seems to have died down to some extent.

Commentary

As stated at the beginning of this study, the automotive sector still represents an important part of the economic system, despite the predominant role of services and the growing importance of new sectors, such as those which are closely connected to the development of information and communications technology (ICT). Apart from its symbolic importance as a major expression of the industrial age, the automotive sector has so far maintained its leading role in innovation - from technological change (such as the growing use of ICT in both production and sales) to organisational models and inter-business relations. From the point of view of industrial relations, this process of innovation means that a traditional stronghold of industrial trade unions has to face major challenges which put at risk the unions' capacity to represent workers and regulate the employment relationship.

As far as worker representation is concerned, union density remains very high in the central vehicle-manufacturing segment of the industry, while it seems to be lower in the components segments. However, the emergence of large transnational companies and of long-term partnership agreements between motor manufacturers and suppliers reduces, at least to some extent, the fragmentation of the sector into a myriad of small firms where unions and industrial relations usually find it harder to establish themselves.

A more significant challenge for unions and industrial relations appears to be the growing tendency of automotive firms to become transnational companies, which make decisions about investment and location regardless of national borders. Divestments and relocations can highlight contradictions and conflicting interests between different national unions in Europe. Moreover, there is not yet an established level at which transnational issues can be jointly regulated by collective bargaining, nor organisational tools that can solve those possible contradictions and conflicts among the unions. However, shaped around the emerging role of EWCs, there are already significant signs of coordinated action on the part of the unions vis-à-vis transnational motor companies. Furthermore, the automotive sector has been able to produce innovations in the field of industrial relations, being the location of what was probably the first European-scale strike and the first substantive agreements concluded by EWCs, not to mention some of the first global-level works council-type bodies.

Even more challenging seems to be the constant process of reorganisation which apparently characterises the industry. Motor companies are continuously in search of a better combination of resources, in the face of internationalised competition. This requires that industrial relations, and especially the unions, must be able to cope with business strategies that show great dynamism and innovation and are often decided and implemented at a transnational level which, as mentioned above, can be out of reach of traditional bilateral relations. The importance of quality issues (as well as safety and environmental aspects) in the automotive sector represents an opportunity for the development of joint regulation, which could probably take innovative paths, including an increasing role for participatory practices. While worker involvement and collective bargaining can probably support increased efforts to improve productivity and competitiveness, measures which simply aim to reduce costs both within firms and in their relations with suppliers can erode the endowment of trust and collaboration which is often necessary to implement innovation and compete successfully, especially in the case of such a complex and interconnected system as that of the automotive sector.

Recent experience related to collective bargaining, the positions of the trade unions and the attitudes of at least some of the major automotive companies seems to confirm the viability of a solution which combines higher adaptability for firms with a broader involvement of workers in companies’ decisions and new forms of protection. A good example was the negotiation in 2001 of a separate set of company agreements for a new Volkswagen subsidiary, Volkswagen 5000 GmbH, which set pay rates below those in the main Volkswagen company agreements (and equivalent to those in the metalworking sectoral agreement), but included new provisions on continuing training, work organisation and co-determination rights which went beyond the main company agreements (DE0109201F). If similar balanced solutions emerge across the sector, automotive production might well remain a point of reference for industrial relations for a long time to come. (Roberto Pedersini, Fondazione Regionale Pietro Seveso)

Annex

Table 7. Major automotive manufacturers with operations in Europe and presence of EWCs
Company Home country Date of establishment and status* of European Works Council
Vehicles
BMW Germany 11 December 1995, Article 13 agreement
Caterpillar USA 20 December 1996, Article 6 agreement
DaimlerChrysler Germany 25 July 1996, Article 13 agreement
Fiat Italy 18 March 1996, Article 13 agreement
Ford Motor Company Europe USA 16 September1996, Article 13 agreement
General Motors Europe USA 16 September 1996, Article 13 agreement
Saab Automobile (GM) Sweden/USA 1 January 1997, Article 6 agreement
Honda Japan 1 March 1995, Article 13 agreement
MAN Germany 30 May 1996, Article 13 agreement
Paccar USA 1996, Article 13 agreement
Porsche Germany No EWC, not covered by Directive
PSA Peugeot-Citroën France 10 July 1996, Article 13 agreement
Renault France 5 April 1993, Article 13 agreement
Nissan (Renault-Nissan Alliance) France/Japan 11 June 1998, Article 6 agreement
Rover UK No EWC, not covered by Directive
Scania Sweden 5 November 1998, Article 6 agreement
Toyota Japan 10 July 1996, Article 13 agreement
Volkswagen Germany 7 February 1992, Article 13 agreement
Volvo Sweden 2 December 1996 Article 13 agreement
Components
American Standard USA 29 May 2001, Article 6 agreement
Arvin Meritor USA 20 January 1998, Article 6 agreement
Autoliv Asp USA/Sweden 16 May 2000, Article 6 agreement
Behr Germany 17 September 1996, Article 13 agreement
Benteler Germany 7 May 2002, Article 6 agreement
Bilia Sweden 26 September 1997, Article 6 agreement
Cummins Engine USA 8 December 1999, Article 6 agreement
Dana USA 22 June 2000, Article 6 agreement
Delphi Automotive Systems USA 10 April 1996, Article 13 agreement
Donnelly Europa USA 5 November 1999, Article 6 agreement
Edscha Germany 6 February 2001, Article 6 agreement
Epcos Germany 26 April 2002, Article 6 agreement
Fag Kugelfischer Georg Schaefer Germany 6 April 1995, Article 13 agreement
Faurecia France 24 June 2003, Article 6 agreement
Federal-Mogul USA 9 July 1996, Article 13 agreement
GKN UK 1 November 1995, Article 13 agreement
Hella Kg Huck & Co Germany 18 September1996, Article 13 agreement
Honeywell USA 13 June 1997, Article 6 agreement
Ingersoll-Rand USA 17 October 1997, Article 6 agreement
Invensys UK 28 June 2000, Article 6 agreement
ITT Cannon USA 19 September 1996, Article 13 agreement
Johnson Controls USA 2 May 1996, Article 13 agreement
Knorr-Bremse Germany 1 May 1995, Article 13 agreement
Lear Seating Corporation USA 6 April 1998, Article 6 agreement
Leoni Germany 7 April 2000, Article 6 agreement
Mahle Germany 20 September1996, Article 13 agreement
Mann & Hummel Germany 31 July 1996, Article 13 agreement
Metso Finland 21 September 1996, Article 13 agreement
Miba Austria 1 December 2002, Article 6 agreement
Mitsubishi Electric Japan 21 June 1996, Article 13 agreement
Norsk Hydro Norway 11 August 1994, Article 13 agreement
Partek Finland 2 February 1996, Article 13 agreement
Raufoss Norway nd
Rautaruukki Finland 2 April 1996, Article 13 agreement
Rheinmetall Germany 27 April 2000, Article 6 agreement
Rieter Switzerland 28 March 1999, Article 6 agreement
Robert Bosch Germany 12 May 1998, Article 6 agreement
Röchling Gruppe Germany 6 December 1999, Article 6 agreement
Schmitz Cargobull Germany 31 October 2003 (agreement in principle)
Tenneco USA 22 May 2002, Article 6 agreement
Thyssen-Krupp Germany 3 November 1999, Article 6 agreement
Tomkins UK 20 September 1996, Article 13 agreement
TRW USA 10 December 1998, Article 6 agreement
Tyco USA 17 May 2000, Article 6 agreement
Valéo France 21 September 1999, Article 6 agreement
Visteon USA 7 March 2001, Article 6 agreement
Wagon Automotive UK 5 July 1999, Article 6 agreement
Zf Friedrichshafen Germany 14 September 2000, Article 6 agreement

* Article 13 EWC agreements are voluntary agreements initially concluded before 22 September 1996 when the EU Directive on EWCs came into force; Article 6 agreements are agreements concluded after that date on the basis of the negotiating procedure and rules laid down in the Directive (and its national implementing provisions).

Source: own composition, on basis of data from EMF, ETUI and other sources.

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