A Solution for Transnational Labour Regulation?

← VI | VII →

List of Tables

Table 1:   Interviews with management representatives from home-country and foreign plants

Table 2:   Distribution employees, plants and production, Daimler AG (2008)

Table 3:   Distribution of employees, plants and production, VW group (2008)

Table 4:   Distribution of employees, plants and production, PSA group (2008)

Table 5:   Distribution of employees, plants and production, Renault (2008)

Table 6:   Distribution of employees, plants and production, Honda (2008/9)

Table 7:   Business situation and employment at TME (2005–2008)

Table 8:   Distribution of employees, plants and production, Toyota group (2008/9)

Table 9:   Global and European capacity and resources of Ford Motor Company (2008)

Table 10: Distribution of employees, plants and production, General Motors/GM Europe (2008)

Table 11: Dispersion of Employment, Production Sites and Production (2008/2009) ← VII | VIII →

← VIII | IX →

List of Figures

Figure 1:   Four ideal-types of international organisation

Figure 2:   An explanatory model of EWC type and effectiveness

Figure 3:   Distribution of Daimler AG operations in Europe, 2008

Figure 4:   Distribution of seats on the Daimler EWC (2008)

Figure 5:   Distribution of plants within the VW group

Figure 6:   Distribution of seats in the Volkswagen EWC, 2008

Figure 7:   Distribution of plants in the PSA Group in Europe, 2008

Figure 8:   Allocation of EWC seats on the PSA EWC, 2008

Figure 9:   Renault operations in Europe, 2008

Figure 10: Distribution of seats on the Renault EWC, 2008

Figure 11: Distribution of Honda operations in Europe, 2008

Figure 12: Distribution of employee seats on the HECCG, 2009

Figure 13: Toyota operations in Europe, 2009

Figure 14: Distribution of employee seats on the TEF, 2009

Figure 15: Distribution of plants in Ford of Europe, 2008

Figure 16: Distribution of seats on the Ford EWC, 2009

Figure 17: Meetings of the Ford EWC and Select Committee, 1996–2009

Figure 18: GM operations in Europe

Figure 19: Distribution of seats on GM EWC, 2008

Figure 20: Structures of distribution and patterns of coordination in companies and EWCs

Figure 21: Home Country Share: Employment, Production Sites and Production (2008)

Figure 22: Car Production Europe 1998–2008 ← IX | X →

Figure 23: Index Car Production Europe 1998–2008 (1998=100)

Figure 24: Share of Home Country Representation at EWC and S.C.

Figure 25: EWC-Index of Representativity

← X | XI →

Introduction to the English edition¹

Between 2007 and 2010, the authors conducted a research project on European Works Councils (EWCs) in eight large automotive manufactures headquartered in four countries: Germany, France, Japan and the United States. The project was financed by the German Research Foundation (“Der Europäische Betriebsrat als transnationale Organisation”) and carried out at the Ruhr-Universität Bochum. This volume is the – enlarged – English edition of the final report originally published in German in 2010. The intervening period has been marked by a number of significant developments first and foremost the financial and economic crisis, which had a major impact on the businesses and strategies of the companies we studied as well as their bodies for cross-border employee representation.

The aim of this introduction is to provide an update on the major developments in this period that affected both the companies and the EWCs. The main concern is how EWCs were affected by the crisis, and in what ways changes in companies’ structures and strategies triggered changes in the structures and activities of the EWCs. The findings included in this update are interpreted using the same theoretical framework already developed for the German edition. As a consequence, the results also indicate whether this theoretical model has retained its validity in view of the fact that although it expressly included scope for change and development, it did not originally address the issue of the possible structural shifts induced by economic crisis.

1.1  Daimler-Benz and Volkswagen – driving through the crisis and onwards

Compared to the other international car producers, the two companies with their headquarters in Germany, Daimler-Benz and Volkswagen, were quite successful in driving through the 2007/2008 financial and economic crisis. By 2013 they had managed to stabilize their worldwide structure, increase production and undertake substantial innovations to their product portfolio. At the same time, employee representative bodies at (national) company and European level were able to consolidate or even extend further their influence as strong players and negotiators. During the period considered here the European Group Works Council of Volkswagen in particular was party to substantial and innovative initiatives to strengthen workers’ rights in the group as a whole globally. ← XI | XII →

Daimer-Benz recovering after the crisis and Chrysler adventure

For Daimler, the year 2007 not only marked the beginning of the financial and economic crisis, but also the end of its cooperation with Chrysler that had begun in 1998. In terms of labour relations, the decade during which Daimler-Chrysler had existed as a single corporate entity had always represented a highly complex enterprise. The European and the World Works Council, had been dominated from the outset by the German Daimler-Benz culture of ‘conflictual partnership’. Following the merger of Daimler and Chrysler the US-American United Automobile Workers Union UAW and its then President Steve Jokisch had been invited to join the employee side of the Supervisory Board (Aufsichtsrat) of the new consortium. However, according to the German side, they did not take this opportunity seriously: for example, they did not attend all the meetings of the Supervisory Board. Just as the two companies never truly adopted a joint strategy and structure for products and production, neither did the two different cultures of employee relations and employment regulation in the German and the US-American parts of the business combine or pursue a common approach. For Daimler, the period after 2007 could be characterized as successfully exiting a very bumpy road.

Between 2008 and 2013, the equity share of the company owned by institutional investors decreased from 73 to 58 per cent, with the proportion held by private investors rising from 17 to 22 per cent. The share owned by the Kuwait Investment Authority remained at 7 per cent, whereas Renault-Nissan bought an equity stake of just 3 per, and a new Abu Dhabi located investor (Aabar Investments) entered with a stake of 9 per cent. During the period 2008 to 2013, the number of cars produced by Daimler rose from almost 2.1 to 2.4 million units, and the corresponding share of cars produced in Germany as a share of the company’s global car production increased slightly from 57 to 58 per cent. Related to the EU, the share produced in Germany increased from 83 to 84 per cent. The share of employment in Germany as a share of worldwide employment in Daimler remained stable at 61 per cent.

One important activity of the World Employee Committee (WEC) concerns defining and monitoring the principles of social responsibility for the company’s operations throughout the world. Management must inform the WEC about any serious problems that might arise in connection with these standards, which also encompass cooperation between management and workers’ representatives at all the group’s plants. In 2008 the procedure for dealing with grievances related to corporate social responsibility was redefined and clarified. It now also requires suppliers to respect minimum social standards.² At the European level, resisting the worsening of working and employment conditions was a regular issue on the EWC’s agenda. Two developments observable in all EU countries were those of expanding precarious employment and raising the retirement age. Although these challenges ← XII | XIII → did not directly originate from Daimler management, they had an impact on the environment in which Daimler operated and, therefore, employment conditions at the company, despite raising new and innovative demands, ensured that the work of the EWC was dominated by defending existing rights and standards.³

The World Employee Committee (WEC) and the European Works Council were re-elected in spring 2014. While the number of official representatives in the WEC was stable at 13, the number of EWC representatives increased from 28 to 31 (from Belgium, Czech Republic, Denmark, France, Germany, Hungary, Italy, Luxembourg, Netherlands, Portugal, Spain, Sweden and United Kingdom). Three of the five members of the EWC’s presidency came from Germany, one from Spain and one from Italy. All in all, during the period under consideration, the EWC and the WEC consolidated their activities and were mainly concerned with defending established levels of pay and conditions, employment levels, and standards for employee participation.

Volkswagen’s way to world leadership

Between 2008 and 2013, worldwide production by the Volkswagen consortium increased from 6.4 million to 9.7 million units (Volkswagen 2013: 1; Volkswagen 2008: 117), almost enabling Volkswagen to reach its goal of overtaking Toyota as the world’s biggest car producer (the Japanese company produced just short of 10 million cars in 2013). It has often been alleged that the highly developed system of codetermination at VW has deterred investors; nonetheless, and despite these arrangements and the strong employee rights they include, shareholders all over the world appear to continue to trust in the German company. This is reflected in the development of the shareholder structure between 2008 and 2013. While Porsche reduced its stake in Volkswagen from 37.4 to 32.2 per cent, international institutional investors increased theirs from 17.7 to 24.3 per cent, with Qatar Holding LLC entering the ranks of institutional shareholders and buying 15.6 per cent and the regional government of Lower Saxony maintaining stable its share of 12.7 per cent. By contrast, private shareholders nearly halved their stake from 24.2 to 12.5 per cent, with domestic institutional investors in Germany reducing theirs from 5.9 to 2.7 per cent (Volkswagen 2013: 87; Volkswagen 2008: 120).

The fact that Volkswagen was not badly affected by the 2007/2008 financial and economic crisis meant that the company was able to continue and even strengthen its worldwide expansion, mainly in China and other Asian countries. And while VW had 61 production plants in 21 countries in 2008, by 2013 this had risen to 107 sites in 26 countries (Volkswagen 2013: 124; Volkswagen 2008: 1). The company grew so fast, in particular in China, that in 2012, and in the following year, a new production plant was opened almost every month. For Volkswagen, this short period after the global financial crisis proved to be decisive in the globalization of its production structures. Whereas in 2008 half of worldwide production (53 per cent) ← XIII | XIV → was still carried out in Germany, by 2013 this share had fallen to just a quarter (25.3 per cent) (Volkswagen 2008: 122; Volkswagen 2013: 83). In the same time period, the German share of European production remained stable at almost 57 per cent. This reflects the rapid growth of the company outside Europe, mainly in Asia. Total employment increased from 337,789 in 2008 to 545,696 in 2013, and the share of overall employment in the group in Germany fell from 53 to 45 per cent (Volkswagen 2008: 122; Volkswagen 2013: 83).

All these data reflect the very robust growth and accelerated pace of globalization in the group’s production and employment structure The pace of expansion, as reflected in vigorous growth rates in sales, production, production sites and employment, is very noteworthy when compared with developments at the other global carmakers during this period. At the same time, the forums for employee representation at company level, especially the EWC, increased their activities and negotiating power. A number of unique and innovative initiatives were pushed forward by the company-level works council, the EWC, the World Works Council and, at national level, the German metalworkers’ union IG Metall as well as internationally by IndustriAll Global Union. In 2008, for example, at the height of the crisis, the EWC was extended to the company’s sales and financial service subsidiaries in Europe.⁴

In October 2009 the EWC (Volkswagen European Group Works Council), the VW Management Board and the International Metalworkers’ Federation signed the ‘Charter on Labour Relations within the Volkswagen Group’. This Charter is unique when compared with other International Framework Agreements (IFAs) or other kinds of agreements concluded at company level in any global group. Recognizing that labour regulation varies in all the countries in which Volkswagen operates, the Charter defines minimum employee participation rights for all subsidiaries in those countries represented on the Global and the European Group Works Council. The Charter shall apply for all companies and sites represented on the Volkswagen Group's European Group Works Council and Group Global Works Council. (…) The Charter defines in-house participation rights in the said area of application.’⁵ It provides for a representative employee body to be established, which should have rights of information, consultation and co-determination. An annex to the Charter specifies which form of participation (information, consultation or co-determination) should apply to which issue. According to the Charter, the rights and structures for participation should be negotiated and signed by management and the employee side in a plant-level agreement. As an update of this Charter, in May 2012 the Volkswagen EWC together with the Human Resource CEOs of all VW’s European companies organized a two-day-conference with representatives ← XIV | XV → of all plants covered by the Charter to evaluate the implementation of and practical experience with the Charter.⁶

In 2010, celebrations were organized to celebrate the fiftieth anniversary of the ‘Volkswagen Law’ and the twentieth anniversary of the establishment of the Volkswagen EWC, attended by both top management and senior politicians – including the then Federal Employment Minister, Dr. Ursula von der Leyen. The Volkswagen Law, which gives the State of Lower Saxony and employee representatives enhanced rights on the company’s Supervisory Board (Aufsichtsrat), had been put under pressure by the European Commission, which had questioned the law’s compatibility with the EU’s principles of free competition. The Volkswagen Law was resolutely defended by the works councils, the VW EWC, IG Metall and many politicians. However, the European Commission brought repeated proceedings at the European Court of Justice against both the German government and Volkswagen for infringement of EU law. Finally, in October 2013 the European Court of Justice dismissed the Commission’s action and upheld the essential provisions of the Volkswagen Law.⁷

Following the signature of the ‘Charter on Labour Relations’ in 2009, the EWC undertook many other initiatives and activities to improve employees’ rights and conditions of employment. For instance, in 2011 a health checkup programme, previously introduced in Germany (at Audi in 2006 and at Volkswagen in 2010), was extended to the international level.⁸ In 2012, the EWC was also active when management intensified cooperation between the MAN, the Volkswagen commercial vehicle brand, and Scania. Given that such forms of cooperation always aim at achieving synergies – possibly leading to cuts in production and/or employment at some operations – the EWC was strongly involved in these negotiations from the outset.⁹ But the most important and publicly recognized activity was the joint signature of the ‘Charter on Temporary Work for the Volkswagen Group’ on 30^th November 2012.¹⁰

This Charter was signed by the Group Management Board, the European Group Works Council, the Volkswagen World Works Council and IndustriALL. It defines the principles governing practice on temporary work contracts for the Volkswagen group globally and aims at guaranteeing minimum employment standards for such employees. The agreement stipulates that temporary work should be used only for ← XV | XVI → extraordinary and limited fluctuations in production and for special projects – not to save costs for normal production operations. A basic guiding figure for the share of temporary work in the total work force at plant level is set at 5 per cent. The Charter affirms the principle of equal pay and equal treatment for temporary workers, depending on their activities. Temporary workers should have the opportunity to participate in training activities, and temporary work is defined as a third pathway for entering regular employment at Volkswagen, alongside vocational training and external recruitment.

In summary, over the period of the first five years following the financial and economic crisis the system of workers’ participation improved significantly through the medium of the European Group Works Council, which developed into the core for employee representation internationally. This is explicable in part by fact that the EWC has a legal underpinning in EU and national law – as compared to the World Works Council, which has no such legal framework. Additionally, the European Group Works Council is more inclusive in terms of the rights and representation of employees in those countries in its scope, with fewer problems in terms of its relationship with local employee representatives. At the global level, the great differences in employee rights and forms of representation in differing countries makes it difficult to include all countries. For instance, there are no democratically elected employee representative bodies in China, Russia, or the USA, although such bodies do exist in Argentina, Brazil, India, Mexico and South Africa. This makes representation and decision- making at the global level a challenging issue. Compared to that, and despite many differences of detail, Volkswagen’s workplace representatives in the EU share a core set of common standards.

The enhanced role of the European Group Works Council is reflected in the 2014 election. The number of representatives increased from 25 to 41, and the number of countries represented rose from 8 to 15. At the same time, the World Works Council expanded significantly from 44 to 94 representatives and from 15 to 20 countries (plus the three guest countries China, Russia, USA).¹¹ All in all, the European Group Works Council succeeded in substantially consolidating its role as the organizing center for international workers’ activities at Volkswagen.

The challenges that the EWCs at Daimler and Volkswagen may face in the future probably turn on problems of organizational integration and coordination as well as that of defining the respective competences of the European and the global levels. The (more than) doubling of members in the VW WWC evidently raises the question how these different actors will be integrated and how a body of that size will be able to develop a common strategy. How can the democratic process of interest articulation be shaped inside the bodies? And which tensions arise from diverse (cultural) rules and expectations? ← XVI | XVII →

1.2  PSA and Renault

In contrast to Daimler and Volkswagen, the French car producers were deeply affected by the crisis of the late-2000s, reflecting the divergent situation of car producers in Europe. While high-price/high-quality premium car producers, such as BMW or Daimler, were able to increase sales, the high-volume/low-price producers not only faced increasing competition from overseas and from premium producers in mini and small car segments, but also contracting markets. The introduction of scrappage subsidies in 2008 and 2009 in some of the larger markets (US, Japan, Germany, France and Italy) temporarily averted a further decline in sales. Moreover, the fact that subsidies in some countries were granted only for cars with reduced emissions (as in France and Portugal, with below 140 g/km and in Italy with less than 130 g/km) was especially helpful for the producers of small cars, such as PSA and Renault. Although the world production of the French car manufacturers increased in 2010, it fell again in 2011 and 2012 in the wake of the deepening of the economic crisis in key markets. The reduction in production volumes mirrors the development in sales. While world production at Renault remained quite stable, sales and the number of registrations in Europe declined (OICA, ACEA, various years).

Sales of new cars plummeted, particularly in France, the most important market for PSA and Renault, but also in South Europe where both companies have a relatively large share of sales and which were severely affected by the financial and economic crisis. For the first time, Renault sold more than half of its products outside Europe (Renault Company Report 2012).

In addition to the shrinking of the European car market, the appearance of new competitors in the low price-high volume sector from South Korea¹² resulted in a drop in market share in Europe for PSA from 14 per cent in 2010 to 11.7 per cent in 2013 and for Renault from 10.9 per cent in 2011 to 9.6 per cent in 2013. Increasing sales overseas could only partially offset the declines in Western Europe. From the second half of the 2000s onwards, the most rapid increase in car sales took place in China, where the number of newly registered passenger cars rose from 5 million in 2007 to 18.4 million in 2014 (OICA 2015). As a result, on the OICA world ranking of vehicle manufacturers, PSA dropped from sixth place in 2000 to tenth place in 2013 and Renault from ninth place in 2000 to eleventh place in 2013 (OICA 2015).