BMW's model for the new Germany

THE GERMAN juggernaut, which has hogged Europe's economic fast lane longer than fellow-travellers care to remember, has stalled. Lumbered with a strong mark, high taxes and the biggest wage bill in the world, Germany is gliding to a halt on the hard shoulder of long-term industrial decline. Extensive servicing is needed to get the vehicle back on the road.

That at least is the impression left by a cursory reading of last week's financial pages. On Tuesday, the Paris-based Organisation for Economic Co-operation and Development (OECD) highlighted Germany's deep-seated structural problems.

In its latest annual report, approved by the German government, the OECD warned that "labour market rigidities and hindrances to competition continue to pose a threat in terms of unemployment persistence". Two years after the recession ended, the west German jobless total is still on an upward path, while the OECD reckons only 70 per cent of eastern Germans are productively employed.

For good measure, the OECD also took a sideways swipe at Germany's stakeholder form of corporate governance, where banks act as main lenders and shareholders in companies, thereby removing the need to chase short-term profits while providing long-term financial stability and ownership security.

It is a system that has served Germany well for 40 years. But as the OECD notes, it does not lend itself well to entrepreneurial, leading-edge technology businesses.

The image of Germany as a land of outdated industrial practices was underlined on the same day, when an estimated 15,000 Volkswagen workers staged strikes in support of a 6 per cent pay claim and against plans to make Saturday a normal working day without overtime.

And two days later, the German motor industry association (VDA) warned that 50,000 of the sector's 650,000 jobs were at risk, mostly in the supply sector, if the trend towards increased production abroad continued.

All this would seem to vindicate the numerous Jeremiahs in German industry who argued that the last recession was not long enough to introduce root- and-branch reforms to make the country more competitive.

Yet the image of Germany as a monolithic industrial giant may be as outdated as the industrial practices that still persist on some shop-floors. Instead of one uniform "model", German industrial relations already take on several different forms. Nowhere is the contrast starker than between Volkswagen, Europe's largest-volume car producer, and BMW, its most profitable car maker.

"Companies like BMW are making more use of their existing workforce," says Rainer Veit, senior economist at Deutsche Bank Research in Frankfurt. "Increased labour flexibility means companies can fine-tune production without hiring and firing new staff."

BMW's plant at Regensburg, 120 miles north of Munich, came on stream in 1986 and met the demands of lean production from the outset. A new work schedule, involving two nine-hour shifts a day and Saturday working, was later transplanted to BMW's main factory in Munich, and became the norm other car manufacturers aspired to.

Among the most popular initiatives is for staff to take up to six months off and continue to be paid on a monthly basis, in return for their annual income being reduced correspondingly for up to three years. Demand is also increasing for part-time work.

Such innovation allowed BMW to weather the recession better than its competitors. The decline in net profits in 1993 - the worst year - was limited to 29 per cent before rebounding sharply. And unlike its rivals, BMW avoided mass layoffs and redundancies.

These changes met little opposition from the unions. "Trade unions only care about those who have got a job," argues Mr Veit. "By making better use of the labour force, productivity increases and with it wages."

The situation at Volkswagen is altogether different. It is the only company in the automotive and engineering sector which negotiates separately with IG Metall, the powerful metalworkers' union. And for years political considerations in the state of Lower Saxony have thwarted management efforts to cut costs.

Up to a third of all jobs in the region depend directly or indirectly on VW. Not surprisingly, successive state governments have balked at using their 20 per cent shareholding in VW to rubber-stamp restructuring that would involve huge job losses and amount to political suicide.

In the meantime, feather-bedding will continue if VW's workers retain the right - enshrined on one of their banners - to "live, love and laugh" on a Saturday.

Despite fears to the contrary, the outcome of the latest dispute will not set the tone for the rest of German industry. Volkswagen will remain the exception, rather than the rule when it comes to German industrial relations.

The "model", if a new one is to emerge, is more likely to resemble BMW - the one now roaring up in the rear-view mirror behind you.

PROMOTED VIDEO
Arts and Entertainment
Robert De Niro, Martin Scorsese and DiCaprio, at an awards show in 2010
filmsDe Niro, DiCaprio and Pitt to star
News
i100
News
In this photo illustration a school student eats a hamburger as part of his lunch which was brought from a fast food shop near his school, on October 5, 2005 in London, England. The British government has announced plans to remove junk food from school lunches. From September 2006, food that is high in fat, sugar or salt will be banned from meals and removed from vending machines in schools across England. The move comes in response to a campaign by celebrity TV chef Jamie Oliver to improve school meals.
science
Sport
England captain Wayne Rooney during training
FOOTBALLNew captain vows side will deliver against Norway for small crowd
Life and Style
Red or dead: An actor portrays Hungarian countess Elizabeth Báthory, rumoured to have bathed in blood to keep youthful
health
News
peopleJustin Bieber charged with assault and dangerous driving after crashing quad bike into a minivan
News
ebooksAn unforgettable anthology of contemporary reportage
News
peopleHis band Survivor was due to resume touring this month
News
people'It can last and it's terrifying'
Life and Style
fashionModel of the moment shoots for first time with catwalk veteran
Sport
Radamel Falcao poses with his United shirt
FOOTBALLRadamel Falcao's journey from teenage debutant in Colombia to Manchester United's star signing
Life and Style
fashionAngelina Jolie's wedding dressed revealed
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Front-Office Developer (C#, .NET, Java,Artificial Intelligence)

£30000 - £45000 per annum + benefits+bonus+package: Harrington Starr: Front-Of...

C++ Quant Developer

£700 per day: Harrington Starr: Quantitative Developer C++, Python, STL, R, PD...

Java/Calypso Developer

£700 per day: Harrington Starr: Java/Calypso Developer Java, Calypso, J2EE, J...

SQL Developer

£500 per day: Harrington Starr: SQL Developer SQL, C#, Stored Procedures, MDX...

Day In a Page

Chief inspector of GPs: ‘Most doctors don’t really know what bad practice can be like for patients’

Steve Field: ‘Most doctors don’t really know what bad practice can be like for patients’

The man charged with inspecting doctors explains why he may not be welcome in every surgery
Stolen youth: Younger blood can reverse many of the effects of ageing

Stolen youth

Younger blood can reverse many of the effects of ageing
Bob Willoughby: Hollywood's first behind the scenes photographer

Bob Willoughby: The reel deal

He was the photographer who brought documentary photojournalism to Hollywood, changing the way film stars would be portrayed for ever
Hollywood heavyweights produce world's most expensive corporate video - for Macau casino

Hollywood heavyweights produce world's most expensive corporate video - for Macau casino

Scorsese in the director's chair with De Niro, DiCaprio and Pitt to star
Angelina Jolie's wedding dress: made by Versace, designed by her children

Made by Versace, designed by her children

Angelina Jolie's wedding dressed revealed
Anyone for pulled chicken?

Pulling chicks

Pulled pork has gone from being a US barbecue secret to a regular on supermarket shelves. Now KFC is trying to tempt us with a chicken version
9 best steam generator irons

9 best steam generator irons

To get through your ironing as swiftly as possible, invest in one of these efficient gadgets
England v Norway: Wayne Rooney admits England must ‘put on a show’ to regain faith

Rooney admits England must ‘put on a show’ to regain faith

New captain vows side will deliver for small Wembley crowd
‘We knew he was something special:’ Radamel Falcao's journey from teenage debutant to Manchester United's star signing

‘We knew he was something special’

Radamel Falcao's journey from teenage debutant to Manchester United's star signing
'I’ll tell you what I would not serve - lamb and potatoes': US ambassador hits out at stodgy British food served at diplomatic dinners

'I’ll tell you what I would not serve - lamb and potatoes'

US ambassador hits out at stodgy British food
Radio Times female powerlist: A 'revolution' in TV gender roles

A 'revolution' in TV gender roles

Inside the Radio Times female powerlist
Endgame: James Frey's literary treasure hunt

James Frey's literary treasure hunt

Riddling trilogy could net you $3m
Fitbit: Because the tingle feels so good

Fitbit: Because the tingle feels so good

What David Sedaris learnt about the world from his fitness tracker
Saudis risk new Muslim division with proposal to move Mohamed’s tomb

Saudis risk new Muslim division with proposal to move Mohamed’s tomb

Second-holiest site in Islam attracts millions of pilgrims each year
Alexander Fury: The designer names to look for at fashion week this season

The big names to look for this fashion week

This week, designers begin to show their spring 2015 collections in New York