The German Automobile Industry in Transition

By Schumann, Michael | The Economic and Labour Relations Review : ELRR, December 1997 | Go to article overview

The German Automobile Industry in Transition


Schumann, Michael, The Economic and Labour Relations Review : ELRR


Socio-structural Conditions in the German Automobile Industry

In January 1997, the number of unemployed people in Germany rose to 4.66 million, an unemployment rate of 12.1%. This figure is the highest in the history of the Federal Republic. It is typical of the political mood in Germany that a large daily paper on its front-page addressed the situation with the headline: 'Unemployment figure last seen in 1933' (Frankfurter Rundschau 3.2.1997)--a direct reminder of the situation of the former 'German Reich' shortly before Hitler took over.

At the moment there are (still) good reasons to say that such a comparison exaggerates the socio-political problem. However, all political powers are in agreement: 'The crucial problem is unemployment' (F. Schosser, Chairman of the German Trade Unions Federation [DGB] Bavaria on 2.2.1997). In search of a solution, the German production model and policy system is under the microscope.

Only a few years ago the German post-war path could be demonstrated as 'a model of success' and be recommended for 'export'. The socially regulated high-wage economy, which began to develop in (West) Germany after 1950 and continued to function well until the beginning of the 1990s, was based on linking the comparative advantages of the location of Germany into a harmonious economic strategy, which was easy to remodel into a social compromise. Five features characterized this system:

* First, by cultivating the tradition to produce diverse, technically excellent products, the high quality segments of the markets, which expanded with the increasing wealth ('niche strategy'), could be captured.

* Second, due to long-term perspectives in business as well as other areas, capital investments could be made which only needed to pay off in the long run and were not blocked by short-term expectations on returns, ('long-term strategy').

* Third, by utilizing the highly competent industrial goods market (in particular, mechanical engineering), the high-quality producers (in particular the automobile industry) were able to provide themselves with flexible automation which met their technical requirements precisely and linked efficiency with flexibility ('flexible automation strategy').

* Fourth, by resuming and reforming active job traditions ('dual system of apprenticeship', 'skilled worker') high-quality/high-technology productions could be flanked by a personnel policy which, at least in some areas, distanced itself from Taylorism and emphasized functional integration, higher qualification and 'production intelligence' ('high qualification strategy').

* Fifth, there existed a system of industrial relations, characterized by established modes of articulation of interests, in which trade unions and employers were able to operate without much friction ('strategy of consensus') with strong rights of codetermination and influence by labour representatives; duality of extra-plant pressure groups [industrial trade unions, collective agreements concerning wages, working hours and general working conditions, autonomous wage bargaining, right to strike] and internal representation of interests [works councils; internal agreements, on concrete conditions of applications of labor force, obliged to maintain company interests and peace, therefore excluding open industrial action].

The system based on these five strategies created a workable social compromise. This, in turn, politically safeguarded the system of the 'corporate welfare state'. The social compromise mainly expressed itself in three social promises which, until the beginning of the 1990s, could be relatively credibly fulfilled:

* Within the economic system, a production volume could be created and growth could be ensured which allowed for an extensive absorption of the work potential: 'work for (almost) all';

* The economic system was accompanied by a production regime which was based on qualified work and institutional embedding of the participants and which--through high productivity--would finance high wages: 'acceptable work';

* Through the economic system the net product would be sufficiently large to finance the social costs for the security and promotion of those who were temporarily unable to find acceptable work: 'social security state'. …

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